Bharat 22 ETF's Further Fund Offer kicks off tomorrow; should you invest?

Bharat 22 — Exchange Traded Fund (Bharat 22 ETF) is all set to launch its second tranche on Tuesday. This Further Fund Offer (FFO) is part of the Government of India’s overall disinvestment programme, announced earlier by the Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, using the ETF route.

The ICICI Prudential managed Bharat 22 ETF will stay open for subscription until June 22. ICICI Prudential AMC proposes to raise up to Rs 6,000 crore via this FFO with an option to retain oversubscription.

Here are key things to know about Bharat 22 ETF:

1) Retail investors are being offered 2.5 per cent discount. 
2) Bharat 22 ETF is cheaper as expense ratio is just 1 basis point. 
3) Dividend yield is 2.6 per cent.

Should you invest?

Experts believe Bharat 22 ETF is not attractive as the ETF is bereft of many robust companies, growing at a fast pace. Big companies like Reliance Industries, HDFC, HDFC Bank and Hindustan Unilever etc are not a part of Bharat 22 ETF, although they are the frontrunners in their respective sectors.  

Besides, the performance of Bharat 22 ETF 1 has not been satisfactory. The ETF has tanked 7 per cent, slipping below its issue price.  

The 22-share ETF is down 1.6 per cent in the last one month against 2 per cent surge in Sensex. In the last three months, Bharat 22 ETF remained little changed while Sensex grew 7 per cent. Taking into consideration the six-month performance, the index shed 1.7 per cent. By comparison, Sensex gained 1 per cent. 

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Government's divestment program

The government plans to raise Rs 80,000 crore in the current fiscal from disinvestment, lower than over Rs 1 lakh crore raised last year. 

Prior to the launch of Bharat-22 ETF which has a diversified portfolio, the government had floated the CPSE ETF comprising stocks of 10 bluechip PSUs -- ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India.