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Franklin Templeton marks down Vodafone Idea debt papers to zero
Franklin Templeton marks down Vodafone Idea debt papers to zero

New Delhi, Jan 18 (TIWN) The Franklin Templeton Mutual Fund on Friday marked down its debt exposure to Vodafone Idea papers to zero over the huge statutory dues that the telecom major has to pay by January 23.

It also put upper bounds on the investment in these funds at Rs 2 lakh per day per fund per investor to prevent speculators from taking advantage of the drop in NAV and any subsequent recovery in the debt.

"Debt securities of VIL held in the schemes of FTMF have been marked down to zero. The valuation adjustment only reflects the realisable price of the relevant securities on the date of valuation and does not indicate any reduction or write-off of the amount repayable by VIL," the mutual fund said in a report.

The schemes will continuously monitor the developments in VIL and take appropriate steps to recover the investment proceeds in the best interest of its unitholders, it added.

Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Low Duration Fund, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund have exposures of 4-7 per cent. The schemes have written down almost their entire exposure to Vodafone Idea causing losses of 4-7 per cent in their NAVs over a single day.

The largest NAV drop has been in Franklin Low Duration Fund at 6.87 per cent.

It also said fresh inflows in the scheme have been limited to Rs 2 lakh per day per fund per investor, till further notice. This limit is imposed only on the new applications received after the cut-off time on January 16, 2020.

"We will review these decisions on a regular basis and take appropriate actions as clarity emerges on this matter. A limit on purchases will help ensure that once clarity emerges and as resolution takes place, the interest of existing unitholders are protected."

A Franklin Templeton spokesperson said that "(VIL) securities held by various fixed income schemes of Franklin Templeton remain rated at investment grade, thus limiting the options available to us, at this point of time. Clarity may take some time to emerge even if the company takes recourse to a curative petition or other measures available to it."

As a "prudent measure, and in order to protect value for existing unitholders in these schemes", the mutual fund has taken these two steps.

"We believe, a combination of these 2 measures will help protect the interests of existing shareholders. We will review these decisions on a regular basis and take appropriate action as clarity emerges."

As per a stock exchange filing by VIL dated January 12, 2020, the board approved certain modifications in the utilisation of proceeds raised from the rights issue subscribed in May 2019.

The Supreme Court in its judgement passed on October 24, 2019, had ruled in favour of the government on the long-standing dispute with various telecom operators including Vodafone Idea Ltd (VIL) on the definition of Adjusted Gross Revenue (AGR). Operators pay a license fee and spectrum usage charges based on AGR.

As per the VIL''s September 2019 quarterly earnings press release, VIL had accounted for liability to the government of Rs 276.1 bn towards underpaid license fees, interest on underpaid license fees, penalties and interest on penalty.

In addition to this, VIL had also accounted for Rs 165.4 bn towards spectrum usage charges.

Telecom companies were given a three months'' timeline to pay the AGR dues i.e. by January 23, 2020.

VIL had filed a review petition against the SC order, but the court had dismissed it on Thursday.

The government has estimated Vodafone Idea''s dues at over Rs 53,000 crore, including over Rs 28,000 crore in licence fee, interest and penalties and the rest on spectrum usage charges.

Other mutual funds with exposure to Vodafone Idea are Aditya Birla Sun Life Mutual Fund, UTI Mutual Fund and Nippon India Mutual Fund.

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