Bharat Bond ETF: New Fund Offer to start from July 14

Edelweiss asset management company (AMC) is planning to launch the second tranche of ‘Bharat Bond ETF’.

The first was launched last year in the month of December. Bharat Bond ETF is a target date exchange-traded fund (ETF) and will come with defined maturity, which is also known as target maturity ETFs.

The two new Bharat Bond ETF series will have maturities of April 2025 and April 2031, which means that they will have a duration of five years and eleven years. A new fund offer (NFO) will start on July 14, which would end on July 17.

Through this ETF, the fund house aims to raise Rs 14,000 crore. It proposes to raise an initial amount of Rs 2,000 crore with a greenshoe option of Rs 6,000 crore in 2025 maturity and an initial amount of Rs 1,000 crore with a greenshoe option of Rs 5,000 crore in 2031 maturity. Close to one-fourth of the issues is reserved for retail investors and rest for retirement funds, qualified institutional buyers (QIBs) and non-institutional investors.

Bharat Bond ETF will only hold bonds with AAA credit rating issued by state-owned owned companies such as REC, PFC, NHAI, National Thermal Power Corporation, NABARD, Exim Bank, Nuclear Power Corporation, and Power Grid among others. A separate Bharat Bond fund of funds (FOF) will be issued for those investors, who do not have Demat accounts.

With this launch of ETF, four maturity points on the yield curve will now be available in 2023, 2025, 2030 and 2031. This will help in creating a liquid yield curve for a different duration for Central Public Sector Enterprises (CPSE) bonds.  

Should you invest?

Retail investors will have to invest at least Rs 1,001 in this fund and in multiples of Re 1 thereafter. They can invest in this offering depending upon their asset allocation plan. They can invest that part of the debt, which they will need at the end of the maturity of these bonds.