First of all it is amusing to see FINANCIAL JOURNALISTS writing about options. FnO is tough to understand for practitioners, so expecting FJ to understand it is not right. Be that as it may, they do write about how options are to be exercised. So that was amusing.
Also amusing was expecting the auditor to communicate with them about an audit done for a Regulator. Again, interesting and amusing.
Then CONCLUDING (like the media KNOWS that SSR was murdered and by whom) that wrong doings happened was again amusing.
I would not have responded to Journalistic foolishness but for the fact that Rs. 28000 crores of Investor money is at stake (including me and my friends, family, classmates, clients, readers (presumably), hence here is a clarification by the management. I can assure you that they could not have issued this BEFORE the FJ’s article went online, and hence the post publishing response.
Here, I quote – this – is by Sanjay Sapre, President, FT Asset Management in a communication to the partners from which I have taken:
While I have been sharing updates on the winding up of the six schemes with you regularly, this letter is to specifically address the unsubstantiated media reports you may have read recently.
At Franklin Templeton, we understand the importance of trust and we have always acted in a manner consistent with the trust our business partners and investors have placed in us. Our brand, with its 25-year history in India, has been built on the core values of “Putting Clients First” and “Working with Integrity”. A strong commitment to our core values has always guided our decision-making process and has been a roadmap for our reputation, which we have painstakingly built over the last 25 years.
Winding up of the 6 funds has had a significant impact on the trust you placed in us as investors and partners and I recognize this. However, I remain certain that this decision, no matter how difficult, was the right decision for our investors to prevent value erosion.
Over the last few days, several media outlets have carried reports on certain observations made in the forensic audit conducted by SEBI. Claims have been made that “Some officials redeemed investments before winding up” suggesting wrong doing or insider trading, and that “Franklin Templeton did not exercise put options in papers despite ratings downgrade”, suggesting there were some reasons beyond the exercise of normal business judgement for such an action.
Besides the fact that the reports regarding the findings of the Forensic audit/inspection are misleading, we believe that it is improper to make any publication regarding the Forensic audit/inspection report as the matter is under the consideration of the Hon’ble Karnataka High Court. It is also important to note that while many articles quote the forensic audit report findings, the auditors themselves have acknowledged in their original submission to SEBI that the report is subject to modification basis explanations and responses to be provided by Franklin Templeton.
As we have previously clarified, employees who made investments in the six schemes continue to hold substantial investments in these schemes. The decision to exercise, or not to exercise a “put” option rests with the investment management team. The team takes various factors and options into account in order to maximize recovery of investment proceeds when making such an investment related decision and exercising a put is not the only available option. All such decisions are taken with an aim to achieve the best possible outcome for our investors.
Some reports specifically call out investments made in certain issuers where we did not exercise a put–option. However, these reports ignore the fact that Franklin Templeton has already initiated legal recovery proceedings in the case of some of these issuers.
Please note that our interactions with SEBI as our regulator are confidential. However, with reports circulating that incorrectly call into question the integrity of Franklin Templeton and our Senior Management, I wanted to reach out directly to clarify this matter.
We have already communicated the reasons for winding up and again request you not to be swayed by unverified or speculative reports. We have followed and continue to follow due process both in making investment decisions and with regard to the winding up of the funds.
I would also like to take this opportunity to inform you that from April 24 till September 30, 2020, the total cash received from maturities, pre-payments and coupons across the six schemes stands at INR 8,262 crores. Part of this amount has been utilized to repay borrowings and post repayment, as of September 30, 2020, we have INR 5,084 crores available for distribution to unitholders in four cash positive schemes (Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund, Franklin India Low Duration Fund, Franklin India Credit Risk Fund), subject to fund running expenses.
I wish to reiterate that the cash flows received so far are without the ability to efficiently monetize assets, which will only be possible after successfully completing the e-voting process. I would also like to remind you that we have placed all the information regarding the funds in the public domain and update this information every two weeks – cash flows received, detailed scheme wise portfolios, upgrades or downgrades, changes to the maturity profile, put/call options exercised, etc. in an endeavour to assure investors that we continue to act in a transparent manner in their best interest.
Our focus remains to return the maximum possible value to investors in the shortest possible time and we continue to make progress in this regard. We will share progress and updates on these matters that are important to you as have been doing these past few months.
I understand, it will take time to regain your trust and faith, and some part of that trust can only be regained as we start to return your money. Please know that we will stay focused on the important task of generating maximum value and returning your monies at the earliest possible time, despite many distractions and challenges caused by some of the baseless allegations being made about us and our intentions.
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