Government to launch its maiden Debt ETF in July after the formation of new government. New Debt ETF will help the CPSEs in meeting their capex requirement via issuance of bonds.
After seeing the success of equity exchange traded funds — Bharat 22 ETF and CPSE ETF, the government is all geared up to launch its inaugural Debt ETF as announced by the Finance Minister Arun jaitley in Union Budget 2018-19, but only in July after the formation of new government, a Ministry of Finance official told Financial Express Online on Wednesday.
Edelweiss Asset Management, which was appointed as asset management company for the proposed Debt ETF in January, is working on the product structure and is in discussion stage with the Central Public Sector Enterprises (CPSEs) to know their requirements and expectations with regard to the product.
The debt ETF will be used for raising capital by CPSEs via issuance of bonds so that they can fund their capital expenditure. The finance ministry has so far appointed AK Capital Services as the transaction advisor and MV Kini as the legal advisor for the proposed ETF, the official said, requesting anonymity.
Edelweiss AMC is also in consultation with the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDA) and other authorities to decide on the regulatory requirements.
“Based on the capex requirement of the public sector units, the index will be created. The ETF is likely to comprise all top rated — AAA and AA — securities from 10-15 CPSEs, and will be launched by July,” the official said.
The government is likely to launch fifth tranche of CPSE ETF on March 19, to raise at least Rs 35,00 crore. In November, the government had mopped up Rs 17,000 crore through CPSE ETF, which was the highest disinvestment transaction so far. Besides that, its another ETF Bharat 22 also saw a resounding success last month when it was oversubscribed by more than ten times.
Finance Minister Arun Jaitley during his Budget speech last year on 1 February 2018 had also said the market regulator SEBI may consider mandating large corporations to use bond markets to finance one-fourth of their capital requirements. Launching of Debt ETF will help in catalyzing the corporate bond market in India.