The Franklin Wind-up Saga
In a recent post, I mentioned that Franklin has started the e-voting process. Investors in the AMC's winding-up funds have started receiving emails about e-voting details and schedule. The email mentioned that the voting was supposed to happen between June 9 and 12. I was hoping that Franklin will be able to start paying some of the investors either in June or July soon after the e-voting. But it does not seem like that will happen. In a recent news, it is known that a petition was filed in Gujarat High Court (HC) against Franklin. The HC then stayed the Franklin's e-voting process.
The next hearing for the case is June 12, so it seems like the e-voting will be postponed. Once the court gets involved, everyone knows what happens to the cases :). They will keep on dragging for ever. So it seems like the investors will not receive their investments in a long time. Franklin hasn't yet updated anything about the issue and if the e-voting date will be moved. I will update this post if there is any other news in this regard.
Franklin Ultra and Dynamic Accrual Funds have cash
In the security level portfolio update for May 29, 2020, it seems like Franklin was able to get rid of loans. I noted in my previous post that if Piramal Enterprises repays on May 29, Franklin Ultra Sort Term Bond Fund will have net cash after paying off all the loans. They did get repaid. That is some good news!
As a result, Franklin Ultra now has 2.92% in cash assets. Which, if everything had worked as expected, we would have received. Now we will have to wait and see. You will also notice in Annexure 1 that interest rate on some bonds have been revised upwards which is another good news. If and when we receive the monies, it will be at a higher value.
The not so good news
There have been some rating downgrades in the month of May as per Annexure 3. Nothing much to worry as of now, but we need to keep a watchful eye on them.
That is it for now. If there is any other news or updates, I will keep you posted. Let's hope for the best. The Franklin saga seems to be going on for ever.
Update [07 June 2020]
Franklin Templeton India on Friday filed a petition before Gujarat high court urging it to vacate the stay on the company’s e-voting process (source). Franklin argued that Securities and Exchange Board of India (Sebi) is the nodal agency which is responsible for considering complaints of investors. We have to wait and see what happens next. The e-voting is supposed to start on June 9.
Update [08 June 2020]
Some investors in Franklin have moved the highest court of India, urging Supreme court to stay the e-voting process. So now the matter has escalated further from a high court to supreme court. We have to wait and see what happens next.
Update [09 June 2020]
Franklin has decided to suspend voting indefinitely. And so starts the court battle which will go on for years. Seems like the investors have exchanged maturity dates of the funds with court related delays :). Either way, most likely, we need to wait for several years before the money is paid out.
Update [15 June 2020]
Another case was filed against Franklin. This time in Delhi high court. Seems like this will end badly in a long drawn court drama. About Rs. 25,000 crores is locked up in various funds that are winding-up. People have to understand that Franklin is in no position to pay that much out of its pocket. The net income was $1.1 billion or about Rs. 7700 crores in 2019. How can it pay Rs. 25,000? If what people going to court want is instant money, then the papers will have to be sold at such low price that they will have to take a huge cut in the pay out.
Update [20 June 2020]
All cases related to Franklin have been moved to Karnataka High Court. The matter would preferably heard in the next three months. This will keep dragging for ever. It is unfortunate that a few rich investors are causing so much trouble to so many small investors. They can afford to hire expensive lawyers to sway decisions in their favor. But other folks are mere spectators.