It will be ‘silly to leave India’, says crisis-hit Franklin Templeton

In November 2020, SEBI had issued a show-cause notice to the company

Global asset manager Franklin Templeton on Tuesday said it is not exiting India and will be investing in rebuilding the brand in the country after facing Sebi action with respect to certain debt schemes.

“I can say categorically that we are not leaving India. It would be silly to leave India,” its president for India Avinash Satwalekar told reporters here.

He acknowledged that over the past two years since the 26-year-old company found itself in the midst of a controversy following capital markets regulator SEBI’s penal action for irregularities, there had been speculation that it might be leaving the country as had been done by other asset managers.

The company was “incredibly profitable” in India, where it has ₹57,000 crore of Assets Under Management (AUM) from 20 lakh investors, he said.

In November 2020, SEBI had issued a show-cause notice to the company following its April 2020 decision to wind up six debt schemes having ₹25,000 crore of AUM from 3 lakh investors, citing liquidity challenges because of the pandemic.

Eventually, the company was asked to pay ₹5 crore as penalty, return over ₹450 crore collected as 22-month investment management and advisory fees, and was banned from launching new debt schemes for alleged irregularities in running six of its debt schemes.

The company had challenged the decision in tribunals and courts, and also returned a bulk of the investments.

Mr. Satwalekar, who took charge as the head of Franklin’s operations here three months ago, said it would rebuild the brand, acknowledging that it had taken a beating over the last two years following the regulatory action.

The company will be re-engaging with distributors. employees, investors and also investing in people, physical presence in the country to capture new growth pockets and also be launching new products.

He said the company was not unwelcome anywhere, though scars from the crisis of 2020 remained in the minds of key stakeholders and the management was keen to dispel the same.

In its first fund launch in a decade, Franklin Templeton announced a new fund offering for a balanced advantage fund which would also be investing in fixed income opportunities.

Its MD and Chief Investment Officer – Emerging Markets Equity for India – Anand Radhakrishnan said it unveiled the NFO because its own investors had to go to rivals having the offering.

When asked if it had restrictions on new launches, he replied in the negative, pointing out that SEBI cleared the NFO over a month ago.

Mr. Satwalekar also said the firm would be regularly launching products over the next 6-12 months.

Mr. Radhakrishnan said India was relatively better positioned as compared to other markets, from a growth perspective, and would witness a shallow slowing down followed by a faster recovery.

The fund is overweight on banking and insurance stocks and also on consumer services sector, he said, adding that it was conservative or underweight on the IT sector because of slowing growth globally.

The NFO for the balanced advantage fund, which would have a bulk of investments in equities spread across the large, mid and small cap scrips, would open on August 16 and close on August 30, according to a statement.