Franklin side pockets holding Vodafone bonds shoot up 20% as interest flows in

New Delhi: More good news for investors in the closed debt schemes of Franklin Templeton Mutual Fund. The segregated portfolios holding Vodafone Idea NCDs have received interest from the telecom company, pushing up their NAVs by almost 20% on Friday. Side pockets of five schemes hold Vodafone Idea NCDs worth about Rs 1,200 crore. These bonds are maturing in September 2023, but give out the annual accrued interest.

Till six months ago, these segregated portfolios were valued at zero as per Sebi rules. But in March, the values were revised from zero to 35% following “a series of positive developments around Vodafone Idea Ltd”. The segregated portfolios were assigned NAVs on 2 March, which in turn showed the value in individual portfolios of investors.

In the six months since 2 March, the segregated portfolios rose smartly 5.84%. On Friday, after Rs 148.74 crore interest flowed in, the NAVs of the side pockets shot up 20%. The fund house will distribute the amount received among investors by extinguishing proportionate units based on the NAV of 2 September (for units held in physical mode) and 9 September (for units held in demat mode).


Given that the portfolios are valued at 35%, there is still a lot of upside remaining. If all goes well and Vodafone Idea pays the principle and interest when the bonds mature in September 2023, investors holding these portfolios can expect their holdings to be worth around 180% of their current value.

While the developments around Vodafone Idea bonds have made investors sigh in relief, there is no update on the other side pockets that hold Yes Bank additional tier-1 bonds. Mutual funds together have some Rs 3,400 crore invested in these bonds, including Nippon Mutual Fund (Rs 2,500 crore), Franklin Templeton (Rs 590 crore), UTI Mutual Fund (Rs 370 crore) and Kotak Mutual Fund (Rs 130 crore).