Key Highlights:

  • Bharat-22 ETF launched by government to raise Rs 8,000 crore
  • Stocks of 22 companies will be available under this scheme
  • Bharat-22 represents six core sectors for subscription

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The Government of India on Tuesday launched the Bharat-22 Exchange Traded Fund (ETF) managed by ICICI Prudential Mutual Fund to raise about Rs 8,000 crore.

This fund, launched on November 14 for anchor investors, will be available from November 15 till November 17, 2017 for non-anchor investors. Each category of the investors will be sanctioned with 25% of the total units for subscription.

Under this ETF, the Retirement Fund has been made a separate category of investors. In case of spill-over, additional portion will be allocated giving preference to retail and retirement funds. There is a 3% discount across the board.

As per ICICI Prudential website, minimum application amount for anchor investors is Rs 10 crore under which both retirement funds (RFs) investors and qualified institutional buyers (QIB) can subscribe.

While for retail individual investors (RII) - the minimum application amount has been set at Rs 5000 and Rs 2,00,0001 each for RFs, QIBs and non-institutional investors (NII).

Companies available under Bharat-22 represents six core sectors namely  Finance, Industry, Energy, Utilities, Fast Moving Consumer Goods (FMCG) and Basic Materials.

The scheme tracks the S&P BSE Bharat 22 Index (‘Index’) that comprises total of 22 stocks from the universe of Central Public Sector Enterprises (CPSEs), Public Sector Undertakings (PSUs) and companies with stakes held under SUUTI (Specified Undertaking of the Unit Trust of India)

Shares of key CPSEs,Public Sector Banks (PSBs) and also the government owned shares in blue chip private companies like Larsen & Tubro (L&T), Axis Bank and ITC will be available.

Other companies under Bharat-22 are: Maharatanas and Navratanas such as Coal India, GAIL, Power Grid Corporation of India Ltd. (PGCIL), National Thermal Power Corporation (NTPC), Indian Oil Corporation Ltd., Oil & Natural Gas Corporation (ONGC), Bharat Petroleum, and National Aluminum Company (NALCO), three Public Sector Banks such as SBI and Bank of Baroda.

The weightage of each individual stock in the Index is capped at 15% and each sector in the Index is capped at 20%.

Government said, "The sector and stock exposure limits help in risk management and reduction of concentration, providing stability to the Index.  The strength of the Index has been demonstrated in its performance from the time of its launch in August 2017 wherein it has out-performed the NIFTY-50 and Sensex."

The reason behind launching Bharat-22 is to divest multiple stocks spread across various sectors in one bundled instrument thereby reducing over hang on individual stocks and maximizing sale proceed for government.

Mayuresh Joshi, Fund Manager, Angel Broking said, "The composition of Bharat 22 ETF is such that only large cap, dividend paying companies are available. There is a good chance that the government could offer a discount to retail investors like it did during the new fund offer and follow-on offer of CPSE ETF."

ICICI Prudential provides four reason for investing in this ETF. Firstly, the scheme comprises stocks of some of India’s largest public & private sector enterprises, and secondly there is diversified exposure of sectors.

Thirdly, the Bharat-22 ETF is available at a discount of 3%, adding more value to returns and lastly could boost the earnings growth potential of the underlying constituent of the Index.