The mutual fund informed the distributors in a note: No effect on NAV

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- Franklin Templeton defaults: Essel Group fails to meet Rs 215 crore NCDs maturity

- Shares of Zee Entertainment Enterprises, Dish TV India, Unlisted EIL and Personal Guarantee of Subhash Chandra for NCDs

(Commercial Representative) Mumbai Ta. May 23, 2020, Saturday


Distributors have been informed in a note that the debt-debt issued by Franklin Templeton Mutual Fund Essel Infraprojects Limited has defaulted. The note states that Issuer-Essel failed to fulfill its maturity obligation at maturity.

According to the information obtained in this case, the mortgage value of this debt-debt is much higher than the value of the debt they have. So that these schemes have no effect on the NAV. The paper-debt is in the form of non-convertible debentures (NCDs), backed by shares of Zee Entertainment Enterprises, Dish TV India, Unlisted EIL and a personal guarantee from Subhash Chandra, Franklin's note said. It is not clear if Franklin Templeton AMC has tried to sell any of these mortgages or to exceed Chandra's personal guarantee.

Zee Entertainment's share price has fallen by Rs 20 to 5 per cent to Rs 15 in the last one year. While the share price of Dish TV has come down from Rs 30 to Rs 3.5. The Essel Group's paper-debt has a maturity value of Rs 412 crore, but Franklin Templeton has put the value at only Rs 3 crore in its book at present. Franklin's four skimo-dynamic acrylics, credit risk, short-term income plan and low duration are 0.15% to 1.5%. The note further states that the Legal Counsel has been appointed by Franklin and is actively considering taking all necessary steps to ensure maximum value can be recovered.

Other mutual funds-AMCs that have invested in Essel Group's paper in 2013 include HDFC, Kotak, ICICI Prudential and Aditya Birla Sun Life Mutual Fund. When Invesco Oppenheimer bought equity holdings in the company for Rs 3 crore in September 2016, some fund houses like ICICI Prudential AMC, Kotak AMC and HDFC AMC recovered their money and other fund houses recovered some of their money.


However, further defaults have hit the industry. Aditya Birla Sun Life Asset Management Company was the victim of a similar credit incident which was issued in November 2016 by Adilink Infra and Multi Trading Limited. It may be mentioned here that Franklin Templeton Mutual Fund has appointed Kotak Mahindra Bank as a consultant for the process of closing these six debt schemes. SEBI has also allowed investors to exit the scheme by allowing them to be listed on exchanges.

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