Wednesday 22 November 2017

4 times oversubscribed, government raises Rs. 14,500 crores from Bharat 22 ETF

Bharat 22 ETF

Financial geeks like us have seen CPSEs ETF been oversubscribed several times in markets before. The Bharat 22 ETF, which broke all past records of oversubscription raised Rs 14,500 crore from the anchor and non-anchor investors in mid-November. The Bharat 22 is the result of promise in Budget 2016-17 given by the Finance Minister It is the second ETF to be launched after CPSE ETF, which was launched in 2014.

The Bharat22 ETF is well diversified among 6 sectors with high-returning Ratnas of Indian corporate sector. This New Fund Offer was open until November 17, 2017. The Units of the Scheme will be allotted 25% to each category of investors. In this ETF, the Retirement Fund has been made a separate category of Investors. In case of spill-over, an additional portion will be allocated giving preference to retail and retirement funds. There is a 3% discount across the board.

The strength of this ETF lies in the specially created Index S&P BSE BHARAT-22 INDEX. This Index is a unique blend of 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. The shares of the Government companies represent 6 core sectors of the economy - Finance, Industry, Energy, Utilities, Fast Moving Consumer Goods (FMCG) and Basic Materials. This combination makes the Index broad-based and diversified. 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 Index constituents include leading 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, Bank of Baroda apart from the 3 private sector companies mentioned earlier.

The government of India under the leadership of PM Modi have undertaken key economic reforms like demonetisation, GST implementation, infrastructure spending, bank recapitalisation. The recent dip in GDP was a cause of policy implementations, not policy paralysis. Moody upgraded India’s rating from positive to stable after 13 years. The stock market has not seen correction and it continues to close on a new-highs. Analysts see an oversubscription of Bharat 22 ETF as a sign of investor optimism.

“We have decided to retain ₹14,500 crore of the total subscription that has come in for Bharat-22 ETF,” Department of Investment and Public Asset Management (DIPAM) Secretary Neeraj Gupta said. The ETF saw bids of nearly ₹32,000 crores coming in, with FIIs bidding for one-third of the money. The portion reserved for retail investors was subscribed 1.45 times; retirement funds —1.50 times and NIIs and QIBs — 7 times. With this, the Centre has raised ₹52,500 crores through disinvestment in the current fiscal.

- Chaitanya Kulkarni


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