Franklin Templeton Mutual Fund schemes receive Rs 148.75 crore from Vodafone Idea

© Nikhil Walavalkar Franklin Templeton Mutual Fund schemes receive Rs 148.75 crore from Vodafone Idea

Five schemes of Franklin Templeton AMC have received Rs 148.75 crore towards payment of interest on bonds held from telecom company Vodafone Idea on September 3, 2021. The bonds were held in segregated portfolios of these schemes. And investors holding units of these schemes’ side pockets will receive the money in their bank accounts in the next few days.

Franklin Templeton AMC has created side pockets in five of its schemes holding bonds issued by Vodafone Idea. The debt investments in Vodafone Idea were marked down to zero by FT MF schemes in January 2020, after the Supreme Court had dismissed the telecom firm’s review petition on Additional Gross Revenues (AGR) liability of over Rs 44,000 crore.

These five schemes were among the six bond schemes that were wound up in April 2020. As per the court order, SBI Mutual Fund was appointed as liquidator of these schemes. The unitholders are getting money in tranches, the last such payout done on September 1, 2021. So far the fund house has returned Rs 23,998 crore to the unit holders.

In the recent past, the financial health of Vodafone Idea was seen deteriorating by analysts. The promoters of the company declined to further infuse capital in this company. In that context, there was speculation around the timely payment of interest on bonds by the company.

A segregated portfolio — or side-pocket as it is called in MF industry parlance — is created to ensure that only investors exposed to the scheme on the day of a credit event, can benefit from the subsequent recovery of dues and also any improvement in the credit profile. The bonds (or the assets held in such side pockets) are valued at zero for accounting purpose till the time the money are recovered from the issuers of the bonds. Side pockets allow the bond schemes to function like any other bond schemes and investors can transact in units of that schemes.

The bonds issued by Vodafone Idea which are held in segregated portfolios of bond schemes of Franklin Templeton AMC offer a 10.9 percent rate of interest and will mature on September 23, 2023.