India’s first PSU bond ETF soon: Bharat Bond gets cabinet OK; check yield, companies, other details

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Published: December 4, 2019 12:44:58 PM

India's first corporate bond exchange traded fund--Bharat Bond ETF--received Cabinet's approval this morning. The ETF is set to be launched in mid-December. We take a look at key details.

Bharat Bond ETF will only hold bonds with AAA credit rating issued state-owned owned companies including REC, PFC, NHAI, National Thermal Power Corporation among others.

The much-awaited launch of Bharat Bond ETF received Cabinet Approval on Wednesday. The ETF (Exchange traded fund) is set to be launched in mid-December. Touted as “India’s first corporate bond ETF,” Bharat Bond ETF will only hold bonds issued by public sector undertaking (PSUs). “We are delighted that the Union Cabinet has approved Bharat Bond ETF, India’s first corporate bond ETF for launch. We at @EdelweissAMC are delighted to bring an exciting new product for fixed income investors to the market,” Radhika Gupta, CEO of Edelweiss AMC said on Twitter. According to Zerodha, Bharat Bond ETF will only hold bonds with AAA credit rating issued state-owned owned companies including REC, PFC, NHAI, National Thermal Power Corporation, Nabard, Exim Bank, Nuclear Power Corporation, and Power Grid among others.

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According to the currently available details, Edelweiss AMC will be launching 2 series of ETFs– 2023 ETF and 2030 ETF which will expire in those respective years and the AMC will keep launching new series, explained Zerodha. Each series will have an index and the ETF will just track that index. The coupons in the Bharat Bond ETF will be reinvested. “And once the ETF matures, the entire proceeds will be paid out to you,” Zerodha explained. The yields are currently in the 7% range. Since it will be passively managed, the expense ratio is also slated to be lower. According to the brokerage firm, it is in the range of  about 0.0005%.

Explaining the tax implications of investing into the ETF, Zerodha said that in case the Bharat Bond ETF is sold within 3 years, it will be considered as short term and STCG as per the income slab will be applicable. “If sold after 3 years it will be considered as long term and LTCG of 20% with indexation is applicable,” said the firm.

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