Franklin To Disburse Our Investment?

You probably remember the Franklin fiasco that happened some 9 months ago. All those who invested in the six wound up funds have their investments stuck for the past 9 months. While the funds were wound up they were still receiving interest income from the papers that it holds. Some papers matured while some others pre-paid the bonds. So overall Franklin has Rs. 14,391 Cr in income so far according to it’s latest report on Jan 29, 2021. Of this amount 4,621 Cr was used up to pay back its borrowings. The left over Rs. 9,770 Cr is available for disbursement. However it was unable to return the monies because of a court case in Supreme Court.


Court ruling

Now in a ruling on Feb 2, 2021 the Supreme Court has asked Franklin to return the available cash to its investors. Moreover Franklin was directed to complete the process in 20 days. SBI Mutual Fund was chosen to undertake the disbursement process. So if everything goes well, the investors might get back some of their investments by Feb 22, 2021. Whether this will really happen is anybody’s guess.


In the past, every time it looked like the money would be returned, there was some new event that would delay the process. So I don’t think this time it will be any different. Lets wait and watch. Franklin has to agree with all the court rulings including accepting SBI as the fund house to disburse. It should be able to get everything ready in 20 days. The SC asked Franklin, SEBI and SBI to report to the court if there is going to be any difficulty with execution of the ruling. I have a hunch that there will be some difficulty :).


Count the eggs before they hatch

If you would still like to count the eggs before they hatch, you can use the security level portfolio to understand how much you might get back. All you need to do is check the Cash (including TREPs) component of the mutual fund you invested in. That is the percentage of the investment you will get back minus any expenses. For example in the case of Franklin Ultra Short-term Fund you can see that the cash component is 53.04%. So you can expect some 53% of your investment to be returned in the next 20 days (if that happens).



If you has invested Rs. 1 lakh, you can expect Rs. 53,000. There may be some expenses related to the disbursement which will be deducted. So the actual amount could be lower. By how much? I don’t know.


Taxation

Don’t forget to calculate your taxes too! If the money is returned, any short term capital gains will be added to your income and taxed at your slab. While long term gains will attract a 20% tax after indexation. So if you get back anything, be prepared to pay advance tax :).



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