Bharat Bond ETF in FY24 only if tenure agreed upon
Informist, Monday, Feb 5, 2024
By Krity Ambey and Shubham Rana
NEW DELHI – The issuance of Bharat Bond Exchange-Traded Fund in 2023-24 (Apr-Mar) hinges on minimum eight public sector companies agreeing on a particular tenure of bonds under the fund, Department of Investment and Public Asset Management Secretary Tuhin Kanta Pandey said. The government was expected to issue the Bharat Bond ETF in December.
"We would have actually gone for an issue in December, but right now we have a difficulty, because minimum eight companies have to be ready," Pandey told Informist. Bharat Bond ETF is an open-ended exchange traded bond fund investing in bonds issued by constituents of the Nifty Bharat Bond Indices, consisting of 'AAA' rated public sector companies.
EXCLUSIVE
The government has raised 387.4 bln rupees through Bharat Bond ETF in the last four years. The ETF was initiated by the government in 2019 to cater to borrowing requirements of public sector companies by pooling investments from retail and institutional investors.
On a question enquiring if the government would issue the ETF in this fiscal year, Pandey said, "We would like to do. But minimum eight companies have to agree on the tenures, because it is yield to maturity." Pandey's department had in December also called for proposals for appointment of consultants and legal advisors for launch of new offering and managing or rebalancing of existing Bharat Bond ETF.
Last year, National Bank for Agriculture and Rural Development, Indian Railway Finance Corp Ltd, NTPC Ltd, REC Ltd, Hindustan Petroleum Corp Ltd, and Housing and Urban Development Corp Ltd had raised 3.5 bln rupees each through 10-year bonds under the Bharat Bond ETF. Nuclear Power Corp of India Ltd, Rural Electrification Corp Ltd, Power Finance Corp Ltd, are among other public sector companies that have raised funds through the ETF. The Bharat Bond ETF, managed by Edelweiss Asset Management, has assets under management of 800 bln rupees.
The demand for Bharat Bond ETF is also low this year after the withdrawal of long-term capital gains tax benefit on debt mutual funds, Pandey said. "The issue is that indexation is no more."
Since Apr 1, the income from mutual funds is taxed at an individual's tax rate for investments, and not under long-term capital gains which provided indexation benefits, as per the 2023-24 Budget announcement. Earlier, the capital gains from the transfer of mutual fund units, other than equity-oriented funds, held for more than three years were considered long term and were taxed at 20% with indexation benefit.
In December, Informist had reported that the Bharat Bond ETF has become an unintended casualty of the government's move to withdraw long-term capital gains tax benefit on debt mutual funds. End
