Bharat Bond Funds of Funds will invest in two ETFs, one will mature after five years in April 2025 while the other after 11 years in April 2031.
After the successful launch of the initial series of exchange-traded funds (ETFs) last year in December, Edelweiss Asset Management today announced the launch of two new Bharat Bond ETFs that aims to raise a total of Rs 14,000 crore from retail and institutional investors. It will open for subscription on July 14 and close on July 17. Bharat Bond Funds of Funds will invest in two ETFs, one will mature after five years in April 2025 while the other after 11 years in April 2031. Bharat Bond ETFs invest in high-quality AAA-rated bonds of public sector companies. The 2025 Bharat Bond index consists of 12 companies in which Power Finance Corporation, REC Ltd, Power Grid Corporation of India and National Housing Bank account for 56 per cent of the index, according to a presentation released by Edelweiss AMC. On the other hand, the 2031 index consists of eight PSUs where Power Finance Corporation, REC Ltd, Power Grid Corporation of India and National Highways Authority of India (NHAI) make up for 60 per cent of the index.
According to Edelweiss AMC, 25 per cent of investment quota will be reserved for retail investors, and the rest will be offered to retirement funds, QIBs (institutional investors) and non-institutional investors. “BHARAT Bond ETF program has achieved some important objectives that were envisioned while creating the blueprint of this program. It has provided aggregate savings in borrowing cost for participating CPSEs/CPSUs/CPFIs,” said Tuhin Kanta Pandey, Secretary, DIPAM, Ministry of Finance. He also said that it has provided easy access to investors into bond markets and adequate liquidity on exchange, which will encourage investor participation and help in developing bond markets further. “The organic increase in AUM of existing Bharat Bond ETFs even during these uncertain times resembles investors building confidence with the product,” Tuhin Kanta Pandey added.
On Thursday, NSE indices also launched two more indices under the Nifty Bharat Bond index series, having maturities in April 2025 and April 2031. “With this BHARAT Bond ETFs will have four maturity points on the yield curve — 2023, 2025, 2030 and 2031. In future we will launch more ETFs and fill the remaining maturities,” said Radhika Gupta, CEO, Edelweiss Mutual Fund. Bharat Bond ETFs provide better liquidity and transparency than bonds, predictability of return, and low-cost access to public sector bonds. Bharat Bond ETFs have a mandate to invest only in AAA-rated securities, in case a credit downgrade happens then such security will be removed from the index on the next rebalancing date. Also, any such downgrade in the issuer’s rating will be brought to the attention of DIPAM.
An individual retail investor can invest a minimum of Rs 1,001 and in multiples of Re 1 thereafter, subject to a maximum investment amount of Rs 2 lakh. For non-institutional investors, retirement funds and QIBs, it is to an extent of Rs 2 lakh and in multiples of Re 1 thereafter. The basket size for unit creation and redemption for large investors is Rs 25 crore and in multiples of Re 1 thereafter, according to the presentation.