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Subscribed record 'four times', Bharat 22 ETF issue mops up Rs 14,500 crore

The 8,000 crore Bharat 22 Electronic Traded Fund was subscribed four times, seeing bids of nearly Rs 32,000 crore coming in, with foreign institutional investors (FIIs) bidding for one-third of the money.

BT Online | November 20, 2017 | Updated 21:27 IST
Subscribed record ‘four times’, Bharat 22 ETF issue raises Rs 14,500 crore

The government has decided to retain Rs 14,500 crore of the total subscription that has come in for Bharat-22 Exchange Traded Fund, which comprises 22 companies. With bids worth Rs 32,000 crore coming in, the 8,000 crore Bharat 22 Electronic Traded Fund was subscribed four times. However, foreign institutional investors (FIIs) bade for one-third of the money. The retail investors' portion was subscribed around 1.45 times, NIIs and QIBs 7 times, and retirement funds 1.50 times.

With this, the government has raised Rs 52,500 crore through disinvestment in the current fiscal, including listing of insurance PSUs, reported PTI, adding that last week the portion reserved for anchor investors was subscribed six times amounting to Rs 12,000 crore.

Compared to its counterpart CPSE ETF, which was launched in March 2014, the Bharat-22 Exchange Traded Fund (ETF) is more diversified with blue chips such as ONGC, SBI, IOC, Nalco, BPCL, NTPC and Bank of Baroda as well as SUUTI shares in entities such as ITC, Axis Bank and L&T. The ETF's expense ratio is 0.0095 per cent. A discount of three per cent is available for all categories of investors. ICICI Prudential Asset Management Company is the fund manager for the ETF.

The issue received highest subscription for any new fund offer (NFO) in the history of Indian mutual fund industry, reported the Economic Times. ICICI Prudential Mutual Fund managed Bharat-22 ETF's new fund offer (NFO) had an initial issue size of over Rs 8,000 crore. As much as 25 per cent of total issue size, or Rs 2,000 crore, was reserved for anchor investors who put in bids worth about Rs 12,000 crore. "During the three days reserved for non-anchor investors, we witnessed an overwhelming response from all investors, particularly retail segment. In due course, the ETF will be listed," ICICI Prudential AMC MD and CEO Nimesh Shah told PTI. LIC, Bank of India, SBI Pension Fund, EPFO and HDFC Ergo Insurance are among those who have put in bids.

This ETF comprises leading companies from the private sector having an exposure of 39 per cent to the fund while the rest are public sector firms. The fund comprises leading blue-chips such as ITC (through SUUTI) with 15.2 per cent weightage, State Bank of India with 8.6 per cent weightage, and Axis Bank (through SUUTI) with 7.7 per cent weightage. Bank of Baroda, Bharat Electronics, Bharat Petroleum Corp, Coal India, Engineers India, Gail India, Indian Bank, Indian Oil Corp, Larsen & Toubro, National Aluminium Co, NBCC (India), NHPC, NLC India, NTPC, Oil & Natural Gas Corp, Power Finance Corp, Power Grid Corp of India, Rural Electrification Corp and SJVN are the other constituents of the fund. The fund consists of stocks from six sectors such as capital goods, finance, oil & gas, power, FMCG and metal, metal products and mining.

"This is the second fund in the PSU ETF series, after Reliance CPSE ETF, which clocked returns twice as Nifty 50 ETF over last one year. The earlier ETF was more skewed towards three sectors and hence the risk factor was high. The current Bharat 22 index is more diversified one with 22 stocks across six sectors. This reduces risk as well as return potential in comparison to the old one. Out of the six sectors, we hold a positive outlook towards 5 of them and neutral in FMCG and hence it is overall futuristic. Also since sectors, including banking and metals, have been in doldrums since long time, a long term investor is set to benefit from this proposition. Notwithstanding the recent rally in PSU banks post recapitalisation decision, there is long way to go," said Jeevan Kumar, Head of Investment Advisory, Geojit Financial Services, had earlier told Business Today.

However, some experts believe that this fund is not for the common investors. "Ideally, such funds are for more evolved investors. For common investors, it is better to stick to diversified funds. While Bharat 22 is more diversified as compared to CPSE ETF, it is still a thematic fund with PSU focus. And in time like these when markets have run up quite a bit, it would be prudent for investors to stick to diversified funds and invest systematically,"  said Anil Rego, CEO & Founder, Right Horizons.

The government has set an ambitious target of raising Rs 72,500 crore for disinvestment in the current fiscal. Of this, Rs 46,500 crore is to be raised through minority stake sale in PSU and Rs 15,000 crore from strategic sale. Another Rs 11,000 crore is to come from listing of insurance companies.

 ALSO READ: Bharat 22 ETF a huge hit among anchor investors


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