Bharat Bond ETF opens for subscription; aims to raise up to Rs 15,000 cr

The ambitious Bharat Bond ETF, through which the government seeks to mop up Rs 15,000 crore, opened for public subscription on Thursday.

Edelweiss Asset Management Company is managing the issue of Bharat Bond ETF, the first corporate bond exchange-traded fund in the country.

Investors can subscribe to the ETF with a minimum unit size of Rs 1,000 and the issue would close on December 20, the fund house said in a release on Thursday.

"Through the ETF, Edelweiss Mutual Fund proposes to raise an initial amount of Rs 3,000 crore with a green shoe option of Rs 2,000 crore in the 3-year maturity period (2023) and Rs 4,000 crore with a green shoe option of Rs 6,000 crore in the 10-year maturity bucket (2030)," it said.

The ETF would invest only in AAA-rated bonds of public sector companies and would have target maturity structures.

The ETF with a 3-year maturity would follow the Nifty Bharat Bond Index-April 2023 and the one with a 10-year maturity would follow the Nifty Bharat Bond Index-April 2030.

The yield as on December 5, 2019, of Nifty Bharat Bond Index-April 2023 is 6.69 per cent and that of Nifty Bharat Bond Index-April 2030 is 7.58 per cent.

Available with a minimum unit size of Rs 1,000, the investors who hold these ETFs for over 3 years would get the benefit of capital gains with indexation.

The ETF would invest in constituents of the Nifty Bharat Bond Indices, consisting of public sector companies. Bharat Bond Funds of Funds (FOF) is also being launched for investors who do not have demat accounts, the release said.

It is also the lowest-cost mutual fund product in India and the cheapest bond ETF/fund in the world. If a retail investor puts Rs 2 lakh in the Debt ETF, the AMC would charge a management fee of just one rupee, the release said.

The Department of Investment and Public Asset Management (DIPAM) has mandated Edelweiss Asset Management Company to design and manage Bharat Bond ETF.

"With the creation and launch of umbrella ETF, we hope to diversify investor base," Finance Minister Nirmala Sitharaman said on December 4 after the Cabinet gave its in-principle approval for the bond ETF.

Globally, Bond ETFs have grown at a healthy pace in the last decade, primarily due to lower costs compared to traditional bond funds.

Bond ETF assets under management globally is around USD 1 trillion. Total ETF assets under management across all asset classes stood at around USD 4 trillion.