The first Indian international fixed income Exchange Traded Fund was listed on the London Stock Exchange on Thursday, with hopes of attracting investors across a broad range of categories to opportunities in India via government majority owned companies.

The LAM Sun Global ZyFin India Sovereign Enterprise Bond ETF as launched by Sun Global Investments and ZyFin Holdings Pte Ltd is composed of six investments that are at least 51 per cent owned by the government, triple A-rated and with high levels of liquidity, its promoters said at a briefing in London on Thursday.

These include bonds of Rural Electrification Corporation, Export Import Bank of India, Power Finance Corporation Power Grid Corporation of India, Food Corporation of India and Mahanagar Telephone Nigam. The average maturity being targeted is around 8.97 years.

The composition of the index will be reviewed on a quarterly basis and adjusted to ensure they continually meet the liquidity, rating and holding requirements. While starting as a $15- million fund they expect it to grow to “a couple of hundred million” in the next year, with the potential for $4-5 billion in the longer term. They have also left open the possibility of other ETF products in the future, including in the private sector.

Mihir Kapadia, CEO of Sun Global Investment, said the ETF provided a “transparent, efficient, cost effective, and seamless” way for investing in India.

“India has made a lot of progress in the regulatory processes but for the common man — the small business in Manchester — there is no avenue to access the Indian bond market and growth story,” said Sanjay Sachdev, Executive Chairman of ZyFin Holdings. They hope the fund will attract investment funds, fund of funds, family offices, as well as retail investors, with what is effectively a “quasi sovereign bond” offering.

Kapadia said that the ETF would offer greater diversification and liquidity than other options currently available to foreign investors, such as masala bonds. With net yields of around 4 to 5 per cent (allowing for rupee depreciation) it remained a very attractive proposition. “You have to compare it with what is available globally at the current time.”

The taxation arrangements will be similar to those of masala bonds — the fund is incorporated in Ireland, and under the double taxation agreement not subject to capital gains tax, but to a withholding tax of 5 per cent.

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