Govt to launch Bharat 22 ETF today, seeks to raise Rs8,000 crore

Mumbai: The government will launch the ‘Bharat 22’ exchange traded fund (ETF) managed by ICICI Prudential Mutual Fund, on Tuesday, targeting an initial amount of about Rs8,000 crore. The new fund offer will be open for subscription till 17 November and a discount of 3% is being offered to all categories of investors.

“While our initial issue size for Bharat 22 ETF is Rs8,000 crore, we can also consider going beyond looking at the response in the market,” said Anuradha Thakur, joint secretary, Department of Investment and Public Asset Management (DIPAM) in the ministry of finance.

The ETF is part of the government’s overall disinvestment programme, and mirrors the S&P BSE Bharat 22 Index, which comprises select companies from the CPSE (central public sector enterprises) universe, stakes held under the Specified Undertaking of the Unit Trust of India (SUUTI), and state-run banks.

“While 39% of the index is in private sector companies, 61% is in government companies, which all have been handpicked by us,” Nimesh Shah, managing director and chief executive officer, ICICI Prudential Asset Management Co. Ltd, said at the press conference. The expense ratio of this ETF stands at 0.0095%, Shah said.

The S&P BSE Bharat 22 Index has a diversified representation in six BSE sectors—industrials, finance, utilities, energy, fast-moving consumer goods and basic materials. The index follows a free float adjusted market cap weighing methodology, with weighting of each individual index constituent capped at 1,5%, while weighting of each BSE sector is capped at 20%.

These weight constraints are applied during the annual index rebalancing in March each year.

Shah explained that if certain scrips rally and rise beyond these designated limits in March, the stocks will be sold and profits will be booked accordingly. “There is an element of active in this passive (investment),” said Shah.

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