The Supreme Court has ordered Franklin Templeton MF to seek consent of the unitholders for the winding up of the six schemes.
Following the order, Sanjay Sapre, President, Franklin Templeton Asset Management (India) said in a letter, "We will issue the notice for seeking consent of unitholders shortly."
With this, the fund house will seek consent from the unitholders for each scheme separately. The fund house has said that the process of seeking unitholders' consent will be through an “Electronic Vote” followed by a meeting through video conference.
Now the unitholders have two choices. One, vote “Yes” in favour of the winding up. Two, vote “No” against the winding up.
The fund house argued that a “Yes” vote would allow them to proceed with an orderly monetization of assets and distribution of monies to unitholders. This will also mean that the schemes will not make a distress sale of portfolio securities to fund redemptions.
On the other hand, a simple majority of “No” vote will mean the funds will be required to re-open for purchases and redemptions. The schemes may suffer significant losses due to the need to sell securities at distress prices to meet heightened redemption pressure.
The fund house also argued that voting for an orderly winding up does not mean a lengthy wait for return of monies. "Once we receive a majority “Yes” vote in favour of the orderly winding up of the schemes, we will immediately proceed with a second vote to seek approval of the unitholders to authorize the trustee, or any other person, to proceed with the winding up of the schemes. The person authorised would then be able to distribute the cash already available in the schemes and make further payments at regular intervals as the schemes monetize assets and receive cash-flow,” " Sapre wrote in the letter.
As on November 27, 2020, Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund and Franklin India Credit Risk Fund have nearly 48%, 46%, 33% and 14% of their respective AUM in cash.
The Supreme Court has listed the matter for hearing next week.
