Edelweiss is set to launch series II of Bharat Bond ETF - a debt ETF that will only hold bonds issued by public sector undertaking (PSUs). Now the really interesting thing about this ETF is that it is a defined maturity ETF, similar to a Fixed Maturity Plan.
What is Target Maturity Bond ETF?
A Target Maturity Bond ETF is an exchange traded fund which has a defined fixed maturity that invests in bonds with similar maturity. This enables it to combine features of bond and mutual funds both. In these ETF’s the underlying securities are held until they maturity of the Scheme.
What is BHARAT Bond ETF?
BHARAT Bond ETF is an Initiative by Government of India to cater to the borrowing requirements of Pubic Sector by pooling investments from retail, HNI and institutional investors. Edelweiss Asset Management has been given the mandate to manage this BHARAT Bond ETF program.
What will the ETF hold?
BHARAT Bond ETF will invest only in the bonds issued by Public Sector Companies. Even within these companies, it will invest only in those bonds, which has a credit rating of AAA.
What are the Advantages of BHARAT Bond ETF vs other debt MF and Bonds?
BHARAT Bond ETF provides following benefits
- easy and low-cost access to Public Sector Bonds
- better liquidity than Bonds
- better transparency than Bonds and MFs
- predictability of return
- Higher tax efficiency to Bonds as coupons from the Bonds are taxed at marginal rates. Bond ETFs are taxed with the benefit of indexation which significantly reduces the tax on return for investor.
How will the interest payments be paid?
The coupons in the ETF will be reinvested. And once the ETF matures, the entire proceeds will be paid out to you.
What will be the expense ratio of the ETF?
The Fund will be managed at a very low cost – 0.0005%#
What are investment gateway options available for Investors?
Investors holding demat account can invest BHARAT Bond ETF. Investor who do not have a demat account have an alternative option to invest via BHARAT Bond Fund of Funds which will invest in the underlying ETF and will have similar maturity as that of the underlying ETF.
What will be the applicable Tax?
As BHARAT Fund ETF will be investing in Fixed Income securities, Debt Taxation will be applicable to investors. Short Term capital Gain (STCG) is taxed at marginal rate and Long Term Capital Gain (LTCG) after 3 years is taxed 20% post Indexation Benefit.
When is the issue opening and how can I buy Bharat Bond ETF?
The NFO opens on 14th July, 2020 and closes on 17th July,2020 . We’ll post the link to the order collection page shortly.
Constituents of the ETF.
Nifty BHARAT Bond Index – April 2025 constituents
| Issuer | Credit Rating | No. of ISINs | Outstanding Bond Issuance amount (in crs.) | Weight |
|---|---|---|---|---|
| POWER FINANCE CORP.LTD. | AAA | 17 | 27409.20 | 15% |
| REC LIMITED | AAA | 10 | 19254.00 | 15% |
| POWER GRID CORP.OF INDIA LTD. | AAA | 16 | 10055.36 | 15% |
| NATIONAL HOUSING BANK | AAA | 2 | 3670.00 | 11% |
| INDIAN OIL CORP.LTD. | AAA | 1 | 2995.00 | 9% |
| NATIONAL BANK FOR AGRICULTURE & RURAL DEVELOPMENT | AAA | 1 | 2800.00 | 9% |
| HINDUSTAN PETROLEUM CORP.LTD. | AAA | 2 | 2500.00 | 8% |
| EXPORT-IMPORT BANK OF INDIA | AAA | 5 | 1765.00 | 5% |
| INDIAN RAILWAY FINANCE CORP.LTD. | AAA | 4 | 1707.00 | 5% |
| NTPC LTD. | AAA | 14 | 1267.00 | 4% |
| NHPC LTD. | AAA | 10 | 2092.80 | 3% |
| NUCLEAR POWER CORP.OF INDIA LTD. | AAA | 1 | 400.00 | 1% |
| Grand Total | 83 | 75,915 | 100.00% |
Index YTM : 5.71%*
The indicative yield provided is of the Index and not that of the Scheme. The Scheme (s) are neither Capital Protected nor guaranteed Return Product and may or may not generate return in line with Index. Indicative Yield of the Index is as on 30th June 2020
Nifty BHARAT Bond Index – April 2031 constituents
NIFTY Bharat Bond Index - April 2031 constituents
| Issuer | Credit Rating | No. of ISINs | Outstanding Bond Issuance amount (in Crs.) | Weight |
|---|---|---|---|---|
| POWER FINANCE CORP.LTD. | AAA | 6 | 13783.00 | 15% |
| REC LIMITED | AAA | 2 | 5309.00 | 15% |
| POWER GRID CORP.OF INDIA LTD. | AAA | 5 | 1893.00 | 15% |
| NATIONAL HIGHWAYS AUTHORITY OF INDIA | AAA | 1 | 1824.00 | 15% |
| NUCLEAR POWER CORP.OF INDIA LTD. | AAA | 3 | 1600.00 | 15% |
| INDIAN RAILWAY FINANCE CORP.LTD. | AAA | 1 | 1410.00 | 13% |
| NHPC LTD. | AAA | 2 | 272.91 | 10% |
| HOUSING & URBAN DEVELOPMENT CORP. Ltd | AAA | 1 | 1040.00 | 2% |
| Grand Total | 21 | 27,131.91 | 100.00% |
Index YTM : 6.82%*
The indicative yield provided is of the Index and not that of the Scheme. The Scheme (s) are neither Capital Protected nor guaranteed Return Product and may or may not generate return in line with Index. Indicative Yield of the Index is as on 30th June 2020
The fund will be managed at very low cost - upto 10,000 crore - 0.0005% p.a. ; Next 10,001 crore to 20,000 - 0.0004% : Over 20,001 crores - 0.0001% p.a.)
