Days after securing deal with Mukesh Ambani's Reliance Retail, Kishore Biyani's Future group firm has defaulted on interest payment of non-convertible debentures (NCDs) due to Franklin Templeton Mutual Fund. The four shuttered debt schemes of Franklin Templeton Mutual Fund (FT MF) witnessed a default from Rivaaz Trade Ventures (RTVL), a Future group entity. The company was unable to service its interest on NCDs due on August 31, 2020.
Following the default, Franklin Templeton will value these securities at zero, on the basis of Association of Mutual Funds in India (AMFI) standard hair cut matrix. A haircut leads to lower-than-market value of an asset, impacting the value of investments in a fund.
As a result, the net asset value (NAV) of Franklin India Income Opportunities Fund fell 6.32 per cent, Franklin India Short term Income Plan 5.02 per cent, Franklin India Dynamic Accrual 3.02 per cent, and Franklin India Credit Risk Fund 0.33 per cent.
On August 29, Future Group sold its retail, wholesale, logistics and warehousing business to Reliance Retail Ventures (RRVL) for Rs 24,713 crore on slump sale basis. According to sources, the value of Rs 24,713 crore includes Rs 12,000 crore debt of Future group. After the deal, the FEL will have surplus cash and debt of around Rs 3,000- 4,000 crore, said sources.
"Based on representations from the Future Group we understand NCDs held by the fund house are proposed to be repaid from proceeds of the transaction. We believe the proposed sale announcement is a positive development for the NCDs held by schemes of FTMF. We are closely tracking developments around the same," Franklin Templeton said in a note to investors.
Around Rs 30,000 crore of investor wealth are stuck in the six debt schemes funds of Franklin Templeton after they were voluntarily closed on April 23, 2020, in wake of liquidity crisis and redemption pressures in bond markets due to the coronavirus crisis. The six funds were Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.
Last week, Future Retail has managed to avert a default by making interest payment of $14 million (or about Rs 103.77 crore) to investors. The company made the payment on the last date of the 30-day grace period granted on the $500 million senior secured notes listed in Singapore.
By Chitranjan Kumar