What is an exchange traded fund?
An Exchange Traded Fund (ETF) is a type of fund that owns the underlying assets and is divided into different shares. It is a marketable security (in the form of shares) that contains a slice of cumulated shares/bonds/commodities/foreign currencies that is sliced into different shares.
What is the objective of issuing Bharat 22?
The main objective of Bharat 22 is to mobilise funds through the selling of the ETF and thus to meet the disinvestment target set under the Budget 2017-18. The budget has set a disinvestment target of Rs 72500 crores for the current year. Mobilisation or Rs 14500 crores from Bharat 22 is expected to push government’s disinvestment revenue this year so far to Rs 52500 crores.
Bharat 22 is the second ETF issued by the government for supporting the disinvestment programme. The first endeavour was the CPSE – ETF (Central Public-Sector Enterprises ETF) that was issued in March 2014 and raised Rs 3,000 crore. The CPSE ETF was a bundle of 10 PSU shares. Later, the government has made two follow-on offers of the CPSE ETF thereby raising Rs 8,500 crores.
Compared to the CPSE ETF, the Bharat 22 holds shares of more companies. There will be a single company cap of 15% weightage in the fund, implying that maximum of a company’s share in the ETF will be 15% of the total fund in terms of value. Similarly, separate sector cap of 15% is also made. Hence, Bharat 22 is more diversified compared to the CPSE ETF.
Another feature of Bharat 22 is that it holds shares of private sector enterprises as well. On the other hand, the CPSE-ETF had only PSE shares. Here, the government’s custody of shares of some of the private sector companies owned by the government investment arm – SUUTI (Specified Undertaking of Unit Trust of India) will be attached under Bharat 22. SUUTI is holding shares of nearly 50 companies through its predecessor- the UTI. The investment arm is having sizable shares in several big private sector companies like ITC, Axis Bank, L&T etc.
Sectors and firms covered under Bharat 22
The Bharat-22 holds shares of companies from six different sectors. From the banking sector alone, the ETF contains four stocks — SBI, Bank of Baroda, Indian Bank and Axis Bank (Pvt). Major feature is the SUUTI’s holding in ITC will be included. Shares of Coal India, BPCL, Nalco, ONGC and IOC are also included.
Bharat 22 is an ETF (Exchange Traded Fund), launched by the government, containing shares of 22 companies including Central Public-Sector Enterprises (CPSEs), Public Sector Banks and shares of some companies owned by government investment arm SUUTI (Specified Undertaking of Unit Trust of India).