Franklin Templeton Mutual Fund floats first NFO post debt fund row

Asserts it won't leave India despite regulatory actions

Franklin Templeton Mutual Fund (Franklin MF) on Tuesday announced the launch of Franklin India Balanced Advantage Fund (FIBAF) -- the US-based asset manager’s first new scheme since a regulatory crisis following its decision to wind up six of its debt schemes in April 2020.

“We believe in growing assets by delivering performance. Having said that, this is one category that is large and we are not present in it. We want to plug that gap,” said Anand Radhakrishnan, managing director & chief investment officer-emerging markets equity (India), Franklin Templeton. The last NFO (new fund offer) in the equity category that the fund house launched was over 10 years ago.

The balanced advantage fund is one of the largest scheme categories with assets under management of over Rs 1.7 trillion.

The response to Franklin MF’s NFO shall be keenly watched by industry players to gauge the impact of the regulatory troubles on investor sentiment.

“We are eagerly looking forward to embarking on a new chapter of growth in India, and the launch of FIBAF represents a first of many steps to this end,” said Avinash Satwalekar, president, Franklin Templeton–India, conceding that the fund house’s brand image has taken a bit of a beating and it is working on rebuilding investors’ trust.

Satwalekar, who took charge as head of the fund house in June 2022 replacing Sanjay Sapre, reiterated Franklin Templeton’s commitment to the Indian market. “I want to say categorically that we are not leaving India,” he said.

There were rumours that the fund house may exit India after strict regulatory action against it last year.

In June 2021, the Securities and Exchange Board of India (Sebi) imposed a penalty of Rs 5 crore on the fund house and directed it to disgorge over Rs 500 crore for “several irregularities” in the running of its six debt schemes that were wound up in April 2020. The regulator also directed the fund house to return over Rs 450 crore collected as 22-month investment management and advisory fees. Further, it imposed a two-year ban on the launch of new debt schemes for the alleged irregularities.

Franklin Templeton has challenged Sebi’s order before the Securities Appellate Tribunal (SAT), where arguments are expected to begin soon. The fund house has also obtained an interim relief from the SAT, which includes the removal of the ban on launching new schemes.

The fund house, however, has said it will not launch any new fixed-income schemes until the regulatory matter is resolved. The proposed new scheme falls in the equity-oriented fund category.

The NFO for the scheme opens on August 16 and closes on August 30.

Following the lifting of the NFO ban earlier this month, a slew of new schemes is being launched by fund houses. Satwalekar said bunching up of several NFOs may impact subscriptions, but “it is difficult to quantify how much”.