Edelweiss AMC announces public issue of Bharat Bond ETF; to raise up to Rs 15,000 cr

Edelweiss Asset Management Company on Thursday announced the public issue of recently approved Bharat Bond ETF, which proposes to raise up to Rs 15,000 crore.

Bharat Bond ETF is the first corporate bond ETF in the country.

The Department of Investment and Public Asset Management (DIPAM) under the finance ministry has mandated Edelweiss Asset Management Company to design and manage Bharat Bond ETF, the fund house said in a statement.

"Through the ETF, Edelweiss Mutual Fund proposes to raise an initial amount of Rs 3,000 crore with a green shoe option of Rs 2,000 crore in the 3-year maturity period (2023) and Rs 4,000 crore with a green shoe option of Rs 6,000 crore in the 10-year maturity bucket (2030)," it said.

The exchange-traded fund will invest only in AAA-rated bonds of public sector companies and will have target maturity structures.

The ETF with a 3-year maturity will follow the Nifty Bharat Bond Index-April 2023 and the one with a 10-year maturity will follow the Nifty Bharat Bond Index-April 2030.

The yield as on December 5, 2019, of Nifty Bharat Bond Index-April 2023 is 6.69 per cent and the Nifty Bharat Bond Index-April 2030 is 7.58 per cent.

Available with a minimum unit size of Rs 1,000, the investors who hold these ETFs for over 3 years will get the benefit of capital gains with indexation.

The ETF will invest in constituents of the Nifty Bharat Bond Indices, consisting of public sector companies. Bharat Bond Funds of Funds (FOF) is also being launched for investors who do not have demat accounts, it said.

It provides the best features of mutual funds, ETFs and bonds and provides safety because it consists of a high-quality basket of public sector companies, liquidity and access at a much lower ticket size, compared to investment in individual bonds.

It is also the lowest-cost mutual fund product in India and the cheapest bond ETF/fund in the world, it said adding that if a retail investor puts Rs 2 lakh in the Debt ETF, the AMC will charge a management fee of just one rupee.

Globally, Bond ETFs have grown at a healthy pace in the last decade, primarily due to lower costs compared to traditional bond funds.

Bond ETF AUM globally is around USD 1 trillion. Total ETF AUM across all asset classes stood at around USD 4 trillion.