The second tranche of the Bharat Bond exchange-traded funds (ETF) will open for subscription on July 14. Bharat Bond ETF is India's first corporate debt ETF initiated by the Department of Investment and Public Asset Management (DIPAM) and designed and managed by Edelweiss AMC.
Here's all you need to know about Series II of Bharat Bond ETF 2020:
- Just like the first tranche of December 2019, the second tranche will be offered in two variants: a 10-year ETF that will mature in April 2031 (Bharat Bond ETF April 2031) and a five-year product that will mature in April 2025 (Bharat Bond ETF April 2025). The two maturities will help meet the interests of both short-term and long-term investors.
- The second tranche will be open for subscription from July 14 to 17, 2020.
Also Read: Bharat Bond ETF - Should you invest?
- The second tranche is expected to raise anywhere between Rs 3,000 to Rs 14,000 crores. The funds raised will be used to finance capacity expansion plans of central public sector enterprises (CPSEs).
- The ETF will invest in constituents of Nifty Bharat Bond Indices consisting of AAA-rated public sector companies such as Power Finance Corporation, REC, Power Grid Corporation and National Housing Bank, among others. The exposure to each company will be capped at 15 percent with quarterly revision of the indexing to minimise risk.
- Of the offer size, 25 percent is reserved for retail investors, while the balance 75 percent is for retirement funds, Qualified Institutional Buyers (QIBs), and non-institutional investors.
- The units of both the ETFs with maturities April 2025 and 2031 will be listed on the stock exchanges where they can be traded. The units of the first tranche will also continue to be available for trading on NSE.
- Investors can buy and sell units from the fund house directly if the transaction value is worth Rs 25 crore. A fund-of-funds is also made available to those who do not have demat accounts. As there is no lock-in period, units can be bought or sold through the trading day at any time.
- In the 2025 bond, the fund allows for a minimum retail investment Rs. 1,001/- and in multiples of Rs. 1/- thereafter, subject to the maximum investment amount of Rs 2,00,000. While for Retirement Funds, QIBs, Non-Institutional Investors, the minimum investment is at Rs 2,00,001 and in multiples of Re 1 thereafter. The same conditions apply for the long-term 2031 bonds as well.
- The fund will be managed at a very low cost of maximum Re 1 for Rs 2,00,000 worth investment.
- Investors in Bharat Bond ETF 2020 will get a tax break with long term capital gains (LTCG) tax applicable at 20 percent post-indexation.
- There will be regular disclosures of portfolio constituents and live NAV through the day to maintain transparency.
- With the launch of Series II, Bharat Bond ETFs will have four maturity points on the yield curve – 2023, 2025, 2030 and 2031.
- Dhawal Dalal will be the fund manager and it will be co-managed by Gautam Kaul.
Currently, the 2019 ETFs -- Bharat Bond ETF April 2023 and April 2030 launched in December -- hold assets worth Rs 5,157 crores and Rs 8,585 crores, respectively. Their returns since launch are around 7.49 percent and 9.15 percent, according to Livemint.
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