The ‘Bharat-22’ Exchange Traded Fund’s (ETF) NFO will be thrown open to anchor investors on November 14, 2017, while subscription for retail investors may begin from November 15 and continue through November 17. As much as 25% of the issue is reserved for Pension Funds, 25 percent for Retail, and 25 percent for Anchor Investors.
The ETF is targeted to raise Rs 8,000 crore for the government to help meet its ambitious Rs 72,500 crore disinvestment target for the current fiscal.
The ETF will cover 22 stocks from CPSE, SUUTI and PSU Banks listed on the BSE – of which 19 will be public sector companies.
The first CPSE (Central Public Sector Enterprises) ETF, which was launched in March 2014, is made up of shares 10 PSUs – ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India. The government has raised Rs 8,500 Cr through CPSE ETF route last fiscal.
As part of the NFO, an upfront discount of 3% would be offered to all categories of investors. The expense ratio of BHARAT 22 ETF is up to 0.0095% for three years from the listing of units of Bharat 22 ETF.
The Public Sector Units (PSUs) that are part of CPSE ETF, as well as the Bharat-22 ETF, include ONGC, IOC, BPCL, Coal India, Gail Bharat Electronics, REC, PFC, and Engineers India. The other central public sector entities on the list are Engineers India, NBCC, NTPC, NHPC, SJVNL, GAIL, Power Grid, and NLC India.
Unlike the CPSE ETF, the Bharat-22 ETF holdings are not entirely PSUs. The ETF includes the government’s strategic holding in Axis Bank, ITC, and L&T held through the Specified Undertaking of Unit Trust of India (SUUTI).
Only three public sector banks – SBI, Indian Bank and Bank of Baroda – figure in the Bharat-22 index.
Bharat 22 is a well-diversified ETF covering six sectors — basic materials (4.4%), energy (17.5%), finance (20.3%), industrials (22.6%), FMCG (15.2%) and utilities (20%). The weight of each individual stock in the Index is capped at 15% and each sector in the Index is capped at 20%.
The Bharat 22 Index will be rebalanced annually in March. The index is managed by Asia Index Private Limited and the ICICI Prudential Asset Management Company (AMC) will be the ETF Manager.
The ETF will be actively traded on the BSE and NSE like other equity shares or equity mutual funds. As per the prevalent tax laws, capital gains arising from investments held up to one year will be classified as STCG and will be taxed at 15%, plus surcharge and cess as applicable. LTCG will be tax exempt.