The Finance Ministry on Friday claimed that the second series of Bharat Bond ETF has oversubscribed by three times on the last day of the issue.
“The second series of Bharat Bond ETF received an outstanding response, oversubscribed more than 3 times, estimated collection around ₹10,000 crore with wide participation across categories. Final numbers are still being tallied and will be released by Monday (July 20),” Secretary, Department of Investment and Public Asset Management (DIPAM), Tuhin K Pandey said in a tweet. However, total mobilisation, as on date, seems to be less than initial estimate of ₹14,000 crore
With second series, the investors have the option in participating in four maturity series: 2023, 2025, 2030 and 2031. ETFs maturing in 2023 and 2030 were launched last December while 2025 (5 years) and 2031 (11 years) series have been launched now.
The ETF is a basket of debt papers of Central Public Sector Undertakings, Central Public Sector Enterprises , Central Public Financial Institutions or bonds of any other government organisation. As of now, all bonds are ‘AAA’ rated, which implies highest security.
The Government expects retail investors, who were making meagre returns on fixed deposits and small-savings instruments, can benefit from ETF either through fixed interest rate or taking advantage of stock exchange platform for buy or sell. Each ETF has a fixed maturity date. It tracks the underlying index on a risk replication basis, that is, matching credit quality and average maturity of the index.
The Bond ETF will be taxable with the benefit of indexation, significantly reducing the tax burden on capital gains for investor.
Out of total issue of second series of Bharat Bond, 25 per cent is reserve for small investors (one with maximum investment amount of ₹2 lakh) while remaining can be availed by high net worth Individuals and institutions such as EPFO and Pension Funds. Units are expected to be allocated next week.
Total mobilisation under first tranche was ₹12,400 crore. One should have demat account to participate in ETF. However, if one does not have, then he/she can participate through Fund of Funds (FoF). Both have similar features.