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(Earlier known as Franklin India Corporate Bond Opportunities Fund)
Introduction to the Fund
The Franklin India Credit Risk Fund (earlier known as Franklin India Corporate Bond Opportunities Fund) is an open-ended debt mutual fund scheme primarily investing in AA and corporate bonds rated below AA. It does not invest in AA+ rated corporate bonds.
As the name of the fund implies, this mutual fund scheme predominately invests in corporate bonds. Since the fund invests in corporate bonds, it isn’t as risky as regular equity-based mutual fund schemes. Hence, if you are looking for a debt-oriented mutual fund scheme that maximizes your portfolio, then this fund is a good choice.
The Franklin India Credit Risk Fund is a fixed income fund that offers regular income as well as capital appreciation.
Franklin India Credit Risk Fund
- About the Fund House
- What are the tax benefits of investing in the Franklin India Credit Risk Fund?
- Fund Performance History
- Minimum Amounts for the Fund
- Asset Allocation Pattern of the Franklin India Credit Risk Fund
- Where does the Franklin India Credit Risk Fund invest its assets in?
- FAQs on Franklin India Credit Risk Fund
About the Fund House
The fund house that manages the Franklin India Credit Risk Fund is Franklin Templeton India. This is the Indian subsidiary of the global conglomerate Franklin Templeton. Franklin Templeton was started in 1947, and the group’s major focus is on investments across the world. Since then, the company has grown to become one of the biggest investment houses in the world.
Today, the company employs more than 600 investment professionals and has a strong presence across 25 countries all over the world. It’s one of the largest and most visible securities global investment company.
Franklin Templeton India has been in the country for more than two decades. The Indian wing of Franklin Templeton was established in 1996, as Templeton Asset Management India Private Limited. The mutual fund schemes were started way back in September 1996 and since then has grown at a steady pace over the years and today has over hundreds of thousands of individual investors in India.
Investment Objective
The Franklin India Credit Risk Fund aims to provide regular income as well as reasonable capital appreciation to investors, by predominately investing in corporate securities.
Fund Information at a Glance
| Features of Franklin India Credit Risk Fund | |
|---|---|
| Fund launch date | 7/12/2011 |
| Scheme Category | Open-ended debt mutual fund scheme |
| Entry load | Nil |
| Exit load | You can redeem up to 10% of the total allocated units without any exit load, one year after the date of allocation. Redemptions beyond this limit will have to pay the following exit load charges
No exit charges are applicable if redeemed after 36 months from the date of allotment. |
NAV (Net Asset Value) in INR As on 9/8/2019 |
|
| Fund Size in INR (As on 30/6/2019) | Rs. 6927.26 crores |
| Weighted average maturity | 3.36 years |
| Yield to maturity | 11.37% |
| Modified duration | 2.34 years |
| Expense ratio | 1.61 |
| Expense ratio (direct) | 0.93 |
| Benchmarks | Crisil 10 Year Gilt Index Crisil Short Term Bond Fund Index |
| Minimum Investment (for fresh purchase) | Rs. 5000 (after that in increasing multiples of Rs. 1) |
| Additional Investment | Rs. 1000 (after that in increasing multiples of Rs. 1) |
| Annualized Returns (Since Inception) | 9.25% |
| Number of Unique Investors | Over 35,000 unique investors |
What are the tax benefits of investing in the Franklin India Credit Risk Fund?
An investor can get the following tax benefits by investing in this fund from Franklin India:
- LTCG (Long Term Capital Gains) tax at 20%. This includes surcharges if applicable and cess. This tax gain is applicable if you hold the units for more than 36 months.
- STCG (Short Term Capital Gains) tax at your applicable tax slabs. This includes surcharges if applicable and cess. This tax benefit is applicable when you hold the units for lesser than 36 months.
- As an individual investor, you do not have to pay any tax on dividends that you receive from this fund. However, the DDT (Dividend Distribution Tax) is deducted at source. The DDT is charged at 29.12%, which includes 25% + 12% on surcharges along with 4% on health and education cess.
Note that: If you are an NRI investor, then the LTCG tax is chargeable at 10%. This includes surcharges if applicable and cess. The DDT tax is paid by the mutual fund house after grossing up the income distributed to the investors.
Risk-o-meter
This indicates the risk level of the Franklin India Credit Risk Fund. The risk level is
Moderate (which means that the principal is at moderately high risk)
*If you are unsure if this fund is right for you, make sure to consult your financial advisor, before investing in it.
Who is this fund suitable for?
This fund is ideal for investors who are:
- Looking for investments in fixed income instruments
- Looking to diversify their portfolio apart from equities.
- Looking to invest in a mutual fund scheme that predominately invests in AA and below rated corporate bonds
- Looking for reasonable long-term capital appreciation along with current income
It’s an ideal alternative to short-term savings instruments.
Ideal Investment Horizon
The Franklin India Credit Risk Fund has the potential to offer maximized returns when an investor stays invested for 3 years or more.
Fund Performance History
Here are the compounded annualized returns for the Growth Plan of the Franklin India Credit Risk Fund compared with two benchmarks.
| Period | Fund | Crisil Short Term Bond Fund Index | Crisil 10 Year Gilt Index |
|---|---|---|---|
| Last 1 year | 7.30% | 9.06% | 13.85% |
| Last 3 years | 8.06% | 7.51% | 7.04% |
| Last 5 years | 8.48% | 8.20% | 8.56% |
| Last 10 years | NA | 7.82% | 6.40% |
| Last 15 years | NA | 7.44% | 6.02% |
| Since Inception | 9.25% | 8.48% | 7.69% |
Top 10 Holdings of the Franklin India Credit Risk Fund (as on 31/7/2019)
| S.No. | Issuer | Percentage of Net Assets |
|---|---|---|
| 1 | Shriram Transport Finance Co. Ltd | 5.36% |
| 2 | Vodafone Idea Ltd | 5.29% |
| 3 | Adani Rail Infra Private Ltd | 4.84% |
| 4 | Renew Power Ltd | 4.05% |
| 5 | Rishanth Wholesale Trading Pvt Ltd | 3.69% |
| 6 | Piramal Enterprises | 3.36% |
| 7 | Andhra Pradesh Capital Region Development Authority | 3.1% |
| 8 | India Grid Trust | 2.79% |
| 9 | Power Finance Corp Ltd | 2.57% |
| 10 | Yes Bank Ltd | 2.39% |
Portfolio Composition of the Franklin India Credit Risk Fund by Assets (as of 30/6/2019)
| Asset Class | Percentage |
|---|---|
| Corporate Debt | 80.99% |
| PSU/PFI Bonds | 15.31% |
| Money Market Instrument | 0.96% |
| Other Assets | 2.74% |
*Note that portfolio holdings are subject to change.
Plan Options
The Franklin India Credit Risk Fund offers the following choice of plans:
- Growth plan
- Dividend plan (Reinvestment and Payout Option)
- Direct – Growth Plan
- Direct – Dividend Plan (Reinvestment and Payout Option)
*For the sake of clarity of investors, the growth plan is referred to as regular growth plan and the dividend plan is referred to as regular dividend plan.
Let’s take a closer look at each of these plans:
- Growth plan (Regular Growth Plan) and Direct Growth Plan
In this plan, the returns from the scheme are made available to investors in the form of capital appreciation. There is no dividend distributed/declared under this plan. Instead, the growth in NAV (Net Asset Value) is included directly in the value of the investment.
- Dividend plan and Direct – Dividend Plan
In this plan, the returns from the scheme are distributed among investors in the form of dividends. The trustee/AMC may approve the distribution of dividends. It’s subject to their discretion.
Investors have two options:
1. Reinvest the distributed dividend into the plan (dividend reinvestment)
2. Receive cash payouts for distributed dividends (dividend payout)
*Note that:
- All plans have a common portfolio.
- The face value of the units in all plans is Rs. 10 each.
- Investors must indicate the type of plan and option while filling out the fund application form.
- If the investor has not mentioned it explicitly, the default choices will be chosen. If the investor chooses the Default Plan, then the default choice is the Direct Plan. If the investor opts for the Growth plan, the default choice is Regular Growth Plan. If the dividend option is chosen, the default choice is Dividend Reinvestment.
- If the investor has chosen Dividend Payout Option, if the amount of dividend payable is Rs.20 or less, then the dividend won’t be paid out but will be reinvested in the scheme.
Minimum Amounts for the Fund
For fresh purchase, the minimum amount is Rs. 5000. For additional purchase is Rs. 1000. In SIP, the minimum amount for investment is Rs. 500. For redemption, the minimum amount is Rs. 1000 or all units if the balance is lesser than Rs. 1000.
For subscription, SIP, and redemption – the amount above the minimum amounts specified can be in any multiples of Rs. 1.
Fund Disclosure
The NAV (Net Asset Value) of the Franklin India Credit Risk Fund is calculated on every business day. Unitholders can view the current NAV at the official website of Franklin Templeton India. The NAV is calculated up to four decimal places, after which it is rounded off using standard rounding conventions.
The fund discloses the annual and half-yearly returns on the last day of the corresponding month. Half-yearly returns are disclosed every March and September.
Asset Allocation Pattern of the Franklin India Credit Risk Fund
Under normal circumstances, the Franklin India Credit Risk fund has the following distribution of assets.
| Investment Instruments | Risk Profile | % of Net Assets (Minimum to Maximum) |
|---|---|---|
| Debt bonds issued by the private sector, corporates, PSUs (public sector undertakings) like banks, NBFCs, and other financial institutions | Low to Medium | 65% - 100% |
| Debt, government securities, REIT (Real Estate Investment Trusts), InvIT (Infrastructure Investment Trust), T-Bills and TREPs | Low | 0 – 35% |
*Note that the fund invests only in securities that are rated AA or below by any SEBI recognised agency.
Where does the Franklin India Credit Risk Fund invest its assets in?
The fund has exposure in the following investment instruments:
1. Securitised debt – up to 50% of overall assets
2. Foreign securities as permitted by the RBI/SEBI – up to 50% of overall assets
3. Derivatives up to a maximum of 50% of overall assets
4. Short selling
5. Repos in corporate debt securities
6. Securities lending – up to a maximum of 40% of overall assets
7. REITs and InvITs – up to a maximum of 10% of the overall assets
FAQs on Franklin India Credit Risk Fund
1. What is the ideal investment horizon for investors investing in this fund?
While you can invest in this fund for short durations, it’s highly recommended that you stay invested in this fund for three years or more, to get the maximum returns.
2. Does this fund have a maximum limit on investments?
Yes. The Franklin India Credit Risk Fund has a cap of Rs. 20 crores of maximum investment by an investor for each plan per application per day.
3. What are the liquidity facilities of this plan?
The Franklin India Credit Risk Fund is open for redemption or repurchase on all business days. The redemption proceeds are dispatched to the policyholder within a limit of 10 days from the receipt of the redemption request. Unitholders have to file their redemption request at the OPAT (Official Points of Acceptance of Transactions) of the fund house.
4. Does the fund offer guaranteed returns?
No. Investments in debt funds are subject to various risks like interest rate risk, credit risk, liquidity risk, etc. The Franklin India Credit Risk Fund has a higher concentration of securities rated below AA, and therefore, the NAV prices are volatile.
However, compared to equity-oriented funds, this fund has lower risk levels.
5. How to apply for the Franklin India Credit Risk Fund?
Investors who want to purchase units of this scheme have to complete the application form (which is available online on Franklin India’s site) and submit the filled-in form to the nearest collection centre or investor service centre. You have to provide the required KYC documents while submitting the application form.
If you already have completed KYC with Franklin India, you can purchase units of this scheme directly from the website, or by using the Franklin India mobile app.
*Disclaimer: Mutual fund investments are subject to market risks. Make sure to read the scheme document carefully and make the right investments. If you have any further doubts, get in touch with Franklin India’s customer support wing by dialling – 1800 425 4255, 8.a.m to 9.p.m on all days, except Sundays.
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