Edelweiss Mutual Fund on December 2, 2022 announced the launch of the fourth tranche of Bharat Bond Exchange-Traded Fund (ETF).
Bharat Bond ETF is India’s first corporate bond ETF and is an initiative of the Government of India, from the Department of Investment and Public Asset Management.
According to a press release from Edelweiss, Bharat Bond ETF will provide retail investors with an option to explore the ‘safe’ debt mutual fund category, which was earlier dominated by institutional investors. It will also help deepen India’s debt market penetration.
The new fund offer will start on December 2, 2022 and remain open till December 8, 2022. Edelweiss proposes to raise an initial amount of Rs. 1,000 crore with a green shoe option of Rs. 4,000 crore. So far, five maturities of Bharat Bond ETFs have been launched - 2023, 2025, 2030, 2031, and 2032.
Salient Features
The ETF will invest in constituents of the Nifty Bharat Bond Indices, consisting of AAA rated public sector companies. The benchmark index it will follow will be the Nifty Bharat Bond Index – April 2033.
Edelweiss said that Bharat Bond ETF will invest in public sector company bonds that meet the eligibility criteria of the Index. Bharat Bond ETF will have similar maturity as that of the Index.
Benefits
According to Edelweiss, the Bharat Bond ETF will provide investors with benefits of higher safety, relatively stable returns, lower tax, no lock-in, and defined maturity.
It provides investors with the best features of bonds, mutual funds and ETFs. They are namely, predictable returns, fixed maturity date, low interest rate risk if held till maturity, diversified portfolio, tax efficient, professionally managed, high liquidity, and low cost.
The fact that they are ETFs, means that investors can buy or sell units of this fund on the exchange anytime during its tenure, Edelweiss said.
The ETF will invest in public sector companies, such as NTPC, NABARD, REC, NHAI, PFC and Indian Railway Finance Corporation.
Investing Amount
The minimum investment is Rs 1,000 and in multiples of Re 1 thereafter. For retirement funds, qualified institutional buyers and non-institutional investors, the minimum investment amount is Rs 2,00,001 and in multiples of Re 1 thereafter.
Edelweiss further announced that Bharat Bond ETF Fund of Funds (FOF) with similar maturities will also be launched for investors who do not have demat accounts.
Target maturity ETFs and index funds are open-ended debt funds with a specified maturity date that aligns with the expiry date of the bonds they have in their portfolios. These funds are simple and transparent investment vehicles that allow investors to have liquidity, stability, and predictability of returns along with lower tax compared to traditional instruments, such as fixed deposits. The funds invest only in constituents that are eligible as per the index methodology and investment objective of the schemes.
Says Tuhin Kanta Pandey, secretary, DIPAM, Ministry of Finance, Government of India: “'Bharat Bond ETF program has received an enthusiastic response from all categories of investors since its launch. It has created a unique opportunity for all Indian investors to invest in public sector undertaking (PSU) bonds and fuel India’s growth story. Crossing a landmark Rs. 50,000 crore of asset under management (AUM) is a testament that Bharat Bond has emerged as a trusted investment avenue with better tax efficiency for many Indian investors.”
Saya Radhika Gupta, managing director and CEO, Edelweiss Mutual Fund: “The target maturity fund category is growing at an exciting pace post the launch of Edelweiss MF’s Bharat Bond ETF. Bharat Bond ETF now has six maturities – from 2023 to 2033, which will allow investors to select the right maturity as per their investment goals.”
