The third tranche of Edelweiss Mutual Fund’s Bharat Bond Exchange Traded Funds (ETFs) will be launched on December 3. The new fund offer (NFO) will, however, continue till December 9. With a maturity date of April 2032, the Bharat Bond ETF will allow all categories of investors to participate in the NFO.
Managed by Edelweiss Mutual Fund, the Bharat Bond ETF programme is a government initiative through the Department of Investment and Public Asset Management and the mandate to manage the fund has been given to Edelweiss Mutual Fund.
The ETF will be launched with a maturity date of April 15, 2032, and is aiming to raise Rs 1,000 crore as the base issue size with an additional greenshoe option. The total assets under management (AUM) of the BHARAT Bond ETF stood at Rs 36,359 crore as of October 30, 2021.
“BHARAT Bond ETF program has achieved some important objectives that were envisioned while creating the blueprint of this program. It has provided aggregate savings in borrowing costs for participating CPSEs/CPSUs/CPFIs. It has provided easy access to investors into bond markets, especially retail investors who are looking for an alternative to fixed deposit,” said Tuhin Pandey, Secretary, DIPAM, Ministry of Finance.
What is Bharat Bond Exchange Traded Fund (ETF)?
It is an Exchange Traded Fund (ETF) listed on the National Stock Exchange (NSE), which invests your money in public sector bonds. The fund has a defined maturity date wherein you will receive your investment amount with returns. Also, you can buy or sell units on NSE anytime during the tenure of the fund.
Why should you invest in Bharat Bond ETF?
The BHARAT Bond ETF will allow you to invest in safe AAA-rated public sector bonds. The fund is managed at a very low cost of 0.0005 per cent per annum (maximum Re 1 for Rs 2,00,000 worth of investment). Since it’s a bond-like structure with a fixed maturity, you can expect “predictable” and “stable returns” at maturity. The ETF is flexible, and you can buy or sell during trading hours on the exchange.
As per Edelweiss Mutual Fund, BHARAT Bond ETF, with a fixed maturity on April 2032, will provide 6.37 per cent of post-tax return on an investment of Rs 100,000 as compared to 3.98 per cent post-tax return on any traditional investment.
What is the minimum investment amount?
The minimum investment amount for the fund is Rs 1,000 and in multiples of Re 1 thereafter.
Investors can avail themselves of online investment modes like net banking and UPI. For offline investment, you need to submit a cheque along with the filled application form. You can also opt for NEFT/RTGS payment modes.
The fund will invest money in bonds issued by CPSEs/CPSUs/CPFIs and other government organisations of AAA credit rating. These bonds are chosen such that their maturity co-terminates (as closely as possible) with the maturity of the fund.
Is there any lock-in period?
There is no lock-in period in the fund. You can sell your ETF units like you buy or sell your shares through your trading and Demat account. However, in the case of Fund of Funds (FOF), there is an exit load of 0.10 per cent if you withdraw in 30 days of investment. After 30 days period, there is no exit load.
Any risks involved?
In terms of risks, like other fixed-income security, BHARAT Bond ETF also has four major risks — price risk, credit risk, reinvestment risk and liquidity risk.
Who should invest in Bharat Bond ETF?
The BHARAT Bond ETF is suitable for investors who are seeking income over the target maturity period and an open-ended Target Maturity Exchange Traded Bond Fund that seeks to track the returns provided by Nifty BHARAT Bond Index – April 2032.
Investors holding a Demat account can invest in BHARAT Bond ETF – April 2032, while those not having a Demat account have an alternative medium to invest via BHARAT Bond ETF FoF (fund of funds) – April 2032. Both will offer a post-tax return of 6.87 per cent for over 10 years.
The BHARAT Bond ETF will invest in AAA-rated PSUs like Indian Railway Finance Corporation, Power Finance Corporation, Power Grid Corporation of India, NTPC Ltd, National Bank for Agriculture and Rural Development, Export-Import Bank of India, NHPC Ltd, and Nuclear Power Corporation of India.
The new fund offer (NFO) will start on December 3, 2021, and end on December 9, 2021.
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