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Bharat 22 ETF offer review

Posted on Tuesday, November 14, 2017

Bharat 22 ETF offer review

We have seen Government PSU ETFs CPSE coming to market in two tranches and getting overwhelming response in the past. Now we have yet another ETF called Bharat 22 that also includes some private sector companies that are having major investments from SUUTI. The Bharat 22 is the result of promise in Budget 2016-17 given by the Finance Minister It is the second ETF to be launched after CPSE ETF (launched in 2014).

The ETF mirrors the BSE Bharat 22 Index which comprises select companies from the CPSE universe, stakes held under the Specified Undertaking of the Unit Trust of India (Suuti) and public sector banks, from the underlying universe consisting CPSE companies, Suuti A group companies, and PSU banks.

The Bharat 22 ETF has a well diversified portfolio that includes six core sectors, including industrials, finance, utilities, energy, FMCG and basic materials, and offers good investment opportunity. This ETF is being managed by ICICI Prudential AMC, comprises select companies from the private sector having an exposure to the extent of 39 per cent while the rest are public sector firms.

The Bharat-22 exchange traded fund (ETF) that aims to raise an initial amount of Rs 8,000 crore for government, is opening for subscription on 15.11.17 and will close on 17.11.17. This ETF is a part of government's overall disinvestment programme, which has set a target of realizing Rs 72500 crore this fiscal. Bharat 22 ETF has reserved 25% each for Retail Investors (up to Rs. 2 lakh limit), QIBs, HNIs and Retirement Funds. Retail investors can make an application for a minimum amount of Rs. 5000 and in multiple of Re. 1 thereon, thereafter. For this offer, one has to apply online that provides various mode of payment of application money. There is 3% upfront cash discount to all categories on investors. Allotment will be made only in demat form and trading too will take place in demat form on BSE and NSE post allotment.

As per test reports, Bharat 22 ETF has offered superior risk adjusted returns. The historical data reveals that ETF has outperformed the S&P BSE Sensex and Nifty 50 on risk adjusted basis over 10-year horizon.The average annualised returns delivered by Bharat 22 ETF across all 3-year holding periods since March 2006 stood at 14.86 percent, higher than the S&P BSE Sensex’s 10.96 percent and Nifty 50’s 11.03 percent, a similar outperformance was also observed in the 5-year holding period. An investment of Rs 10,000 in Bharat 22 ETF on March 17, 2006 would have grown to Rs 44,475, compared to S&P BSE Sensex’s Rs 34,084 and Nifty 50’s Rs 34,879. The Bharat 22 ETF has also delivered a higher dividend yield of 2 percent during the financial year of 2016 – 17, compared to 1.3 percent of the S&P BSE Sensex. The ETF has also recorded lower price-to-earnings ratio for majority of time compared to the S&P BSE Sensex, hence delivering better returns with lower volatility in earnings.

The Bharat 22 ETF is expected to invest a majority of its capital in equities of listed companies thus from the taxation point of view, it would be considered as an equity investment. ETF investments are not subject to wealth tax however, profits from the fund are subject to short term capital gains and long term capital gains. In case profits are obtained by an investor through sale of the Bharat 22 ETF units within 1 year from the date of unit allocation, short term capital gains (STCG) rules are applicable. If ETF units have been held for over a year from the date of allocation before being traded for a profit, long term capital gains (LTCG) taxation rule is applicable. At present, the applicable tax rate in case of STCG is 15% of profits earned, while the LTCG rate in case of equity investments is currently nil.

Bharat 22 ETF portfolio includes following scrip with their weightings and sector weightage.

Anchor investors have submitted bids for Rs. 12000 crore on 14.11.17 and thus it is oversubscribed by 6 times against offer size of Rs 2000 showing interest of institutional investors.

Conclusion: Investors looking for safe medium to long term investment for better returns may consider this ETF opportunity.

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About Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.


User Comment

12. Vasant kaneria  Nov 18, 2017 10:07:48 AM IST Reply
*Bharat22 set to provide listing gains*

With markets bottomed near 10100 and looks to make fresh highs.....

It seems that Bharat22 will have 3 day weighted average price coming low.

15th Nov - 36.74
16th Nov - 37.07
17th Nov - 37.24

Average should be near 37.02

After 3% discount it would cost 35.90

Predicting markets making new top in next two weeks, we can forecast price of Bharat22 to be 38.5.

This will give a margin of 6% on listing day to allottees.

At Rs 2 lacs application you get 5550 units and at 38.5 it would give a profit of Rs 14300

@37.25 todays rate = 7500 profit
Or @ 36.75 low rate of few days back = 4600 profit

All the best to those subscribed..
11. patience & passion  Nov 18, 2017 8:10:53 AM IST Reply
Price of per unit to be fix at between 37 to 37.50 .
After discount it will be at 35.90 to 36.40 range .
10. Upendra Patel  Nov 17, 2017 1:56:08 PM IST Reply
what is the subscriction figur in retail ?
10.2. CHIRAG  Nov 17, 2017 7:16:16 PM IST
How Market Price is fixed at the allotment time ?
10.3. KumarMDU  Nov 17, 2017 10:02:39 PM IST
Price of the issue is calculated based on last three days average price of the stocks and their volume. Perhpas the price will be slightly high as the sensex has rose 500+ points in last two days which may reduce the benefit of 3% concession. Let us see.
9. Upendra Patel  Nov 17, 2017 1:50:26 PM IST Reply
what is the subscriction data? how many subscribe in retail ?
8. Sanjeev Sood  Nov 16, 2017 10:14:38 AM IST Reply
Why shd. anybody buy this ??? There are thousands of Mutual Funds , with bumper return and a track record of 5 years or more.
The biggest disadvantages of this one is compared to other mutual funds :
1. It restricts investment Mostly to Govt Companies that too select one. Fund Manager is restricted not being ablee to take advantage of switching to best performing companies
2. The price of constituent is jacked up tremendously ( see last 2 month chart of most of constituent scripts )
3. 3% discount to all - is nonsence.
4. Govt. intent was lechrous in last few issues.

8.1. Narasimham  Nov 16, 2017 11:04:25 AM IST
ETFs by nature are different in structure from normal MFs as they are linked to an index. Returns may not be as fabulous as MFs but these are far more stable and have low commissions charged to the extent of 1.5 -1.75% typically. This particular ETF has private players to the tune of 1/3 of corpus namely ITC, Axis Bank, L&T etc. It has good sectoral balance also.
8.2. KumarMDU  Nov 16, 2017 11:20:51 AM IST
All points are good and valid. one more point is that, Govt will not stop its divestment with this. there will be some more OFS for the shares in the constituents of B22. As soon as as they anounce OFS the price of that stock will fall like any thing and thereby reduce overall appreciation of B22. P
7. Vasant Kaneria  Nov 16, 2017 11:04:34 AM IST Reply
What''''s subscription data at the end of 15th November.
6. Dr.SANJEEV PARIKH  Nov 16, 2017 8:49:14 AM IST Reply
What''s subscription data at the end of 15th November.
5. Vinay Gupta  Nov 16, 2017 6:02:35 AM IST Reply
What is the price of unit?
4. bishy  Nov 15, 2017 4:11:22 PM IST Reply
If one applies for 20K and over subscription is by 10 times. How are the chances of getting allotment and for how much money? Can any one give an example to understand. I am new to NFO so do not have any idea.
4.1. Krishnakumar CS  Nov 15, 2017 10:56:12 PM IST
Here there is no lottery. Everyone will be allotted proportionately for the number of shares applied based on the retail subscription
3. Tom  Nov 15, 2017 3:12:57 PM IST Reply
Hello Experts , how this will be ? can i wait for till listing or subscribe now.
3.1. AR  Nov 15, 2017 4:21:30 PM IST
I still can''t find the scrip code for CPSE or B22 on BSe/NSE... Any help?
3.2. J Ravi  Nov 15, 2017 8:32:35 PM IST
CPSEETF BSE 538057      
2. AR  Nov 15, 2017 4:18:13 PM IST Reply
Consider a conservative investor having MF portfolios, de-mat shares (long term), bank FDs and approx net worth of about 50 lacs... what should be subscription amount for himself? I know and understand that B22 won''t beat the top MF or the multi-bagger small cap I am holding, but it is for sustained, limited growth. Is it wise to invest an amount received as cash gifts in name of my son?
1. SachinPatel  Nov 15, 2017 11:33:50 AM IST Reply
What is the minimum amount I need to invest ? How can I sell it ?
13.1. Jon snow  Nov 15, 2017 12:29:07 PM IST
Min is 5000 rs. Not sure how to sell though .
13.2. iamtrunal  Nov 15, 2017 3:31:52 PM IST
You can sell it just like Normal Mutual fund once it lists on BSE & NSE in the first week of December
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