Bharat 22 ETF 4th Tranche is opening- Should you invest?

The government needs a lot of money to run the country. This money comes to the government by tax and by disinvestment. Through disinvestment, the government companies in which the government has a stake, earn money by selling them in the market. In the common language, like you and we sell shares in the stock market, in the same way, the government also sells its shares in the market. Every year the government sets the target of disinvestment in the budget. Before 2017, the government was keen to sell their stakes separately in PSUs but that leads to disappointment as investors were not ready to buy the shares for the PSUs not doing well in Dalal Street. Therefore, in 2017 the government in the Union Budget announced to meet the target of disinvestment via new vehicle i.e. Bharat 22 ETF. This is when Bharat 22 ETF was born.

According to the Fy18-19 budget, the total expenditure of the government is about 27 lakh cr and the total earning is 20 lakh cr. Out of the earning of 20 lakh cr, about 1.2 lakh cr will come from disinvestment. So the government this year will do a lot of stock selling in the stock market. The privatization of PSU is also on the radar.

Bharat 22 ETF comprises of following Companies:

Index constituents

Weight

Index constituents

Weight

ITC 14.3% BPCL 4.5%
L&T 16.7% Bharat Electronics 3.1%
Axis Bank 8.4% Bank Of Baroda 1.1%
SBI 9.4% Indian Bank 0.2%
NTPC 7.7% REC 1.2%
Power Grid Corporation 7.4% SJVN 0.2%
ONGC 5.2% NHPC 0.9%
National Aluminium 3.9% NLC India 0.2%
GAIL 4.5% NBCC India 1.1%
Coal India 4.2% Power Finance Corporation 0.8%
India Oil Corporation 4.2% Engineers India 1%

The index is comprised of Central Public Sector Enterprises (“CPSE”), Public Sector Banks and private entities which are Strategic Holding of Specified Undertaking of Unit Trust of India (“SUUTI”). The fund is managed by ICICI Prudential AMC. This ETF mirrors a readymade S&P BSE Bharat 22 Index. This is an open-ended exchange-traded fund. There is no lock-in period for retail investors. They can sell it on the very next day of allotment. Since the launch of Bharat 22 ETF, the government has earned Rs. 26,400 Cr via this tool.

1st Tranche of Bharat 22 ETF was launched in the month of Nov 2017 vide which the government had garnered close to Rs.14500 Cr against the total bid of Rs. 32,000 Cr.

2nd Tranche of Bharat 22 ETF was launched in the month of June 2018 vide which government had garnered Rs. 8400 Cr. ( FF0)

3rd Tranche of Bharat 22 ETF was launched in the month of Feb 2019 vide which the government had garnered Rs. 3500 Cr. ( FF1)

4th Tranche of Bharat 22 ETF details:( FF2)

a) Opening on 3rd Oct for Anchor investors.

b) Opening on 4th Oct for Retail investors.

c) It is an open-ended ETF.

d) There is a discount of 3%.

Performance of the Bharat 22 ETF

The Bharat 22 ETF has given a return of -3.91%  in the last one year. Since inception as well the fund has not generated enough return for the investors in fact given a negative return. Bharat 22 ETF was launched in Nov-17 and had made a decent debut on BSE, the fund got listed at Rs 36.30 per unit on BSE, a 0.91 percent premium over its issue price of Rs 35.97 per unit and within minutes of trading went to 37.36.

As on 26.09.2019, the Bharat 22 ETF is trading at 34.97 this means the fund has given a negative return for long term investors. The main reason was the poor performance of the market after the introduction of LTCG in the 2018 budget.

The last Bharat 22 ETF which was launched in Feb 2019 had given a stellar listing return to the investors. The allotment was done at 31.5191 and total of 6345 units had been allocated at the current market price of 33.81 on the day of listing. So a profit of close to 15k per application of 2 lakh was made last time.

How to Apply?

Investors in this category can invest with the minimum investment amount of Rs. 5,000 and in multiples of Re.1 thereafter, subject to the maximum investment amount of Rs. 2,00,000 (Rupees Two Lakhs Only). The investors can apply through ICICI MFs website, HDFC Securities app, Zerodha App or many other portals. In the case of oversubscription, the ETFs units will be given depending upon the number of the application.

Should You Invest?

The 4th tranche which is opening in the month of Oct 2019 will have a discount of 3% for all Investors. We at InvestorZone feel that it is a good opportunity for the safe investors who are looking to invest in the blend of good PSUs which have good dividend yield, and good private companies such as Axis Bank, L&T, and ITC for the long term( since govt is looking to aggressively privatize PSUs) and as well as for listing gain.

Moreover, ETF is a low-cost investment option as these have a lower operating cost, including the management fees. In ETF, the fund manager does not select stocks but mirrors a readymade index.

    Cheques cleared and again investors trapped. 33.95 quote.
    Assume you will get at 33.65
    Who knows at a time of listing where it will gone?
    Government is only interested on looting.

    Bharat 22 ETF Preview:

    Discount not attractive, but outlook for PSU stocks improving
    Valuations reasonable, CAN APPLY for market related returns

    (Anil Singhavi)

    Bharat-22 #ETF- 4 opens on Thursday. Govt eyes Rs 8,000 cr mop up from the issue.

    Govt has so far raised around Rs 35,900 cr through Bharat-22 ETF.

    Nov 17-Rs 14,500 cr
    June 18- Rs 8,400 cr
    Feb 19- Rs 13,000 cr

    Important Update for Bharat 22 ETF

    https://d2un9pqbzgw43g.cloudfront.net/main/IMG-20191002-WA0010.jpg

    Yesterday, a new update has been told that Govt is not selling its share in ITC and REC. What does this mean for us?

    This means that in this ETF, the discount which was being told 3% earlier, will now get around 2.3%. This is because now Bharat 22 ETF will have to buy ITC and REC shares from the open market and it does not get any discount so effective discount will be lowered.