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Edelweiss AMC likely to clinch mandate for government’s debt ETF

KR Srivats New Delhi | Updated on January 03, 2019 Published on January 03, 2019

The selected AMC would work with the government and the advisors in all aspects of creating, launching and managing the proposed debt ETF.   -  Getty Images/iStockphoto

Showcases its expertise in handling NPAs, debt management to win the deal: sources

Edelweiss Asset Management (EAM) is all set to bag the mandate from the government for the latter’s first-ever debt exchange-traded fund (debt ETF).

A relatively small player in the Indian asset management industry, EAM has made it to the top, thanks to its move to quote almost ‘zero fee’ in its financial bid, tilting the scales in its favour although it came in only third in the technical bid, sources said. EAM is also likely to have showcased its expertise in handling stressed assets and debt management to clinch the mandate, it is learnt.

If this mandate were to go to EAM at this bid price, then it may have to go out of pocket, relying on group resources to accomplish the task, industry sources added.

DIPAM’s call

It may be recalled that five asset management companies — SBI Funds Management, Reliance Nippon Life Asset Management, UTI Asset Management Company, Aditya Birla Sun Life AMC besides EAM — were in the race for the mandate to create, manage and launch the debt ETF, which was announced by Finance Minister Arun Jaitley in his Budget speech.

The Department of Investment and Public Asset Management (DIPAM) had, on November 16, invited AMCs to bid for setting up a debt ETF. The bids were to be submitted by December 17.

According to the information available on the department’s website, the selected AMC would work with the government and the advisors in all aspects of creating, launching and managing the proposed debt ETF, including all funds from operation (FFO), tranches, and additional offerings.

The debt ETF would comprise bonds, credit-linked notes, debentures, and promissory notes as underlying instruments issued by participating CPSEs/ PSBs/ PSUs. The proposed debt ETF may also include government securities (G-Secs).

Finance Minister Arun Jaitley had in the last year Budget announced plans for a debt ETF, following the success of equity ETFs such as CPSE ETF and Bharat-22 ETF.

Also read: All you wanted to know about Exchange Traded Funds

Capex needs

The debt ETF is expected to help state-run companies meet their capex and business needs by leveraging their aggregate strengths. This will bring enhanced liquidity, investors base and transparency of the participating central public sector enterprises (CPSEs).

In India, the corporate bond market is relatively small at about 13 per cent of GDP. On the other hand, the government bond market is around 30.4 per cent in terms of GDP. G-Secs account for 79 per cent of the total amount of outstanding bonds in India.

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Published on January 03, 2019
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