Here is a Brief on Bharat 22 ETF, the New Fund Offer (NFO) from ICICI Prudential AMC
What is Bharat 22 ETF?
The government of India, in the Budget speech of 2017, announced its plan to achieve a divestment target of Rs 72,500 crore in the FY 2017-18. Bharat 22 ETF has been set up as one of its vehicle to achieve the target. It is an open-ended Exchange Traded Fund which will invest in similar composition and weightages as they appear in Bharat 22 Index.
How is the underlying index (S&P BSE Bharat 22 index) constituted?
The index is collectively comprised of 22 stocks of Central Public Sector Enterprises (CPSE), Public Sector Banks and private companies which are Strategic Holding of Specified Undertaking of Unit Trust of India (SUUTI). The said 22 stocks are spread across six sectors (Basic Materials, Energy, Finance, FMCG, Industrials and Utilities).
The index invests a maximum of 15% in a single stock and 20 per cent in a particular sector.
Who will manage the scheme?
The government of India has appointed ICICI Prudential AMC to create, launch and manage Bharat 22 ETF. Mr. Kayzad Eghlim will manage the fund.
Who should invest in Bharat 22 ETF?
The scheme is intended for investors who are seeking long-term wealth creation through a diversified portfolio which is largely comprised of high-quality public sector undertakings.
Is there any lock-in period?
There is a lock-in period of 30 days from the date of allotment for Anchor investors. There is no lock-in period for others, including retail investors, retirement funds, qualified institutional buyers (QIBs) and non-institutional investors (NIIs).
What are the tax implications?
The taxation treatment for Bharat 22 ETF is in line with other equity mutual fund schemes. Short-term capital gains (STCG), that is, gains if the investment is held up to one year is taxed at 15% plus surcharge and cess as applicable. Long-term capital gains (LTCG), that is, gains if the investment is held for more than one year are tax-free.
How can I invest in Bharat 22 ETF?
The NFO is open for subscription from November 15 to November 17, 2017 for retail investors. Applications to invest in Bharat 22 ETF through NFO can be submitted online as well as offline. Offline applications can be submitted to any of the service centre of ICICI Prudential AMC or CAMS. For online application, ICICI Prudential AMC website, IPRUTOUCH mobile app and other platforms like BSE Star MF, MF Utility, CAMSONLINE, etc may be used.
It is mandatory for the applicants to hold a Demat account in which the allotted units will be delivered. Minimum and maximum application amount for retail investors is Rs 5,000 and Rs 2 lakh, respectively.
Is there any extra benefit in investing through the New Fund Offer (NFO)?
Units of Bharat 22 ETF are being offered at a discount of 3 per cent on the basis of the Reference Market Price. Reference Market Price is determined as an average of FVWP (Full Day Volume Weighted Price) on BSE from November 15 to November 17, 2017.
When are the units allotted? How?
Units of Bharat 22 ETF will be allotted to the successful applicants in whole numbers within 5 business days from the closure of the NFO period. They will be delivered directly to the Demat account of the applicant.
What happens in the case of oversubscription or under subscription?
In case the NFO is oversubscribed, the units will be allotted in proportion to the amount of the applications received. And, in case of under subscription, all the units applied shall be allotted. Refund amount, in case of oversubscription or unsuccessful application, will be directly credited to the bank account of the applicant registered with his/her Demat account.
The maximum amount to be raised by BHARAT 22 ETF shall be allocated in the following manner.
• Anchor investors: Not exceeding 25% of 'Maximum Amount to be Raised'
• Non-Anchor investors:
RIIs- Not exceeding 25% of 'Maximum Amount to be Raised'
RFs - Not exceeding 25% of 'Maximum Amount to be Raised'
QIBs and NIIs- Not exceeding 25% of 'Maximum Amount to be Raised'
How can I liquidate my investments in Bharat 22 ETF?
The units of Bharat 22 ETF will be listed on BSE and NSE within 5 business days from the date of allotment. Units can be freely traded on the stock exchange like direct equity shares, once they are listed.
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