Mumbai: Bharat Bond ETF, a government instrument to tap retail money, has obtained more than Rs 12,000 crore worth of subscriptions, people tracking the issue said, as the investment window closed Friday.
The largest debt fund offer in India was subscribed 1.71 times, with local individual investors and non-resident Indians pouring in money.
The ETF will invest in a basket of triple-A-rated government-owned companies. This is the first such issuance in India and is seen as an attempt to woo retail investors to bonds.
The fund is managed by Edelweiss. AK Capital was the sole adviser to the government.
Wealthy investors, corporate houses and foreign portfolio investors too bet on such new fund offers, which provide relative safety with investments in top companies.
“Such a large sum should be seen as a success, especially when risk-averse investors are seeking safety net,” said the boss of mutual fund analytics company.
The ETF comes with a target maturity date, liquidity and expense ratio of less than 1 paisa, driving demand. It offers two tenures — three years and 10 years, maturing in April 2023 and April 2030.
Units with a three-year tenure carry a yield of 6.69%, while the 10-year series bears 7.58%. This scores well over a fixed deposit from State Bank of India, which offers maximum interest of 6.25%.
The bond ETF will be taxed on the same lines of debt mutual funds. If investors hold investments for more than three years, indexation benefits or inflation-adjusted tax calculations can be availed of.
“For retail investors, this Bharat Bond FoF (fund of fund) is better suited in terms of convenience and liquidity,” ICICI Direct Research said in a note. “Bharat Bond ETF is a tax-efficient, long-term investment option for conservative debt fund investors,” it said.
While investors with demat accounts can buy the ETF units and trade on the stock exchanges, retail investors who don’t have demat accounts could use the fund of fund option. This option is aimed at facilitating retail investors to buy or sell the units like normal mutual funds, where they can’t trade on the exchanges and the net asset value is based on the closing price of the day.
The issue that offers higher safety has found favour with all categories of investors at a time when investor interest in the debt markets is waning due to a series of defaults led by IL&FS in September last year.
Source: Economic Times