SBI Funds Management Pvt. Ltd plans to auction off assets in the frozen six Franklin schemes through a separate ‘one-to-many’ platform, kept away from its fixed income team to avoid conflict of interest, a person with knowledge of the matter told Mint.
The fund house is also contemplating staying away from bidding on the platform altogether. The Supreme Court has tasked the fund house with winding up the roughly ₹17,000 crore of assets in the six debt schemes of Franklin Templeton Mutual Fund that were frozen on 23 April 2020.
SBI Funds Management is also on track to distributing another ₹9,122 crore to Franklin investors this week, which has been accumulated in the schemes from coupon payments and maturity of debt over the past 10 odd months. “A lot of the debt in the schemes is fairly liquid and can be sold off quickly. We estimate that around 60% can be sold off in two weeks’ time,” said the person cited above.
However, SBI Funds Management will need to submit a plan for the sale of assets to the Supreme Court and approval from the court before proceeding, he said. This process can further delay the sale.
“Special care will have to be taken to avoid conflict of interest. SBI Funds Management may not even participate in the one-to-many platform for selling the Franklin assets. The platform will be managed by persons at arm’s length from the SBI MF fixed income team,” he added.
A senior industry professional noted that SBI Mutual Fund faces a dilemma. By bidding for Franklin assets, there may be issues of conflict of interest, while not bidding may be an opportunity cost for SBI MF. For instance, the debt paper may offer attractive opportunities for buyers in case of recovery in the debt if it is bought at a discount to its face value.
“The team at Franklin knows the paper better than SBI MF because they have bought the paper. From a technical standpoint they are better placed to sell it,” an industry professional said. The opinion of SBI MF was not sought before assigning the sale responsibility to them, he added.
