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Franklin Templeton Mutual fund exits JSPL after the downgrade
March 11, 2016

An update on the exit of Franklin Templeton Mutual Fund from JSPL and the way forward for investors.


Author : iFAST Research



 Franklin Templeton Mutual fund exits JSPL after the downgrade

Franklin Templeton Mutual Fund has been in the news recently on account of its holding the bonds of Jindal Steel & Power Ltd (JSPL). This is the third time in 2016 that JSPL has been downgraded and the current rating is D as on March 9, 2016. The rationale given by CRISIL for the current downgrade is on these lines.

“The rating downgrade reflects delays by JSPL in payment of interest on its term loans; the delays were due to weakened liquidity. Liquidity deteriorated significantly as the steep fall in steel realisations coincided with high debt repayment obligations. Pressure on liquidity intensified further due to delays in materialisation of asset monetisation plans and refinancing of debt”. 

Franklin Templeton Mutual Fund has sold the entire holdings in this instrument in 2 tranches on February 29, 2016 and March 10, 2016 respectively.

The table below shows the downgrade trends of JSPL.

Jindal Steel and Power Ltd.

Effective date

27 March 2014

10 April 2015

11 September 2015

14 November 2015

21 January 2016

15 February 2016

09 March 2016

Ratings

(Long Term/Short Term)

AA/A1+

AA-/A1+

A+/A1

A/A2+

BBB+/A3+

BB+/A4+

D/D


 

The performance of the Franklin Templeton Funds since the last downgrade on March 9, 2016 is given below.

Scheme

NAV

Absolute Returns*

CAGR*

09-Mar 2016

10-Mar 2016

1 Day

1 Month

6 Months

1 Year

2 Years

3 Years

Franklin India Corporate Bond Opportunities (G)

15.00

14.96

-0.32%

-1.02%

2.50%

6.68%

9.49%

9.16%

Franklin India Dynamic Accrual Fund - (G)

50.54

50.42

-0.24%

-0.51%

3.27%

7.88%

10.77%

8.53%

Franklin India IBA - (G)

50.99

50.82

-0.33%

-1.03%

1.99%

5.39%

9.64%

8.82%

Franklin India Income Opportunities Fund (G)

17.06

16.98

-0.49%

-1.61%

1.88%

5.81%

8.98%

8.85%

Franklin India Short Term Income (G)

3035.21

3021.03

-0.47%

-1.60%

1.72%

5.68%

8.90%

8.90%

Franklin india Low Duration Fund (Growth Plan)

16.63

16.61

-0.10%

0.07%

3.86%

8.77%

9.51%

9.57%

* Returns are as on March 10, 2016

 

On February 17, we had released a note on Franklin Templeton’s exposure into JSPL. Our advise to investors regarding Franklin India Short Term Income Plan and Franklin India Income Builder Account (our recommended funds) were on these lines.

“On the basis of the current scenario, we have put these funds on the radar and aim to get more clarity from the fund house on how they are going to manage this exposure in their funds. Until then, we would advise our investors not to take fresh or additional exposures into these funds and maintain the status quo for their existing investments”.

We continue to maintain this stance and would advise our investors to take fresh exposures into these 2 funds only after we have more clarity on the other instruments in the portfolio having ratings of AA- and below. We advise our existing investors to hold on to the funds for some more time.



Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's scheme information document including statement of additional information. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website.Please read our disclaimer in the website.



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