InvestorQ : With the Supreme Court passing its order in the Templeton case, what do you as the next logical steps by the fund?
Katherine Gonsalves made post

With the Supreme Court passing its order in the Templeton case, what do you as the next logical steps by the fund?

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rhea Babu answered.
3 months ago
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The Supreme Court order has taken care of the immediate steps. It has also appointed SBI MF to handle the entire activity so the onus will be on them. But here is how it will pan out in the next few weeks. SBI MF game plan to coordinate the payouts to the unit holders of the six beleaguered MF schemes of Franklin Templeton is already approved by the court. This was long needed, but the process will still be a challenge.

In the first phase of the activity, SBI MF will arrange to distribute a sum of nearly Rs.9,122 crore to the unit holders of the six beleaguered schemes with original AUM of Rs.26,000 crore. It may be recollected that in the six schemes, Templeton AMC reported cash of around Rs.14,000 crore as of Dec-20.

That will be used to pay out the Rs.9,122 crore on a pro-rata basis subject to repaying the remaining loans in the books of these funds. As of Feb-20, just one out of the six funds that were under stress and closed for redemption is still cash-negative. That makes the job that much simpler for SBI Mutual Fund.

But the bigger challenge may be in undertaking Phase 2, which will follow after this. Phase 2 will entail liquidating the balance investments of the six funds. That is going to be a sort of blind date as the corpus is supposed to be Rs.17,000 crore but the market value of these investments is not clear. It is not clear if these investments in the fund books really do have a secondary market readily available or not.

SBI MF has to determine the likely value of these investments after a thorough analysis of the portfolio of the six funds. One can safely assume that most of the remaining assets are invested in extremely illiquid assets or perhaps even assets of very low quality. That will only be clear once SBI MF commences efforts to liquidate the portfolio. However, the move is appreciable in that it brings the case to rest; losses of investors notwithstanding.

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