Bharat 22 is an Exchange Traded Fund (ETF) launched by the government by incorporating shares of different listed companies. It is basically an exchange traded fund (ETF) that can be purchased and sold like shares in the stock market.
Bharat 22 is a major part of the government’s disinvestment programme to disinvest the shares of government held companies. It was launched in August 2017.
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.
Significance Bharat 22
The relevance of Bharat 22 is that it is a useful tool to mobilise funds by selling public sector companies’ shares in an easy way. Government was able to meet the disinvestment target during 2017-18 and 2018-19 mainly because of the multiple methods including ETFs through which disinvestment are made. The targets were significantly high as well. ETF route is an easy one at the same time gives tremendous revenues to the government.
Amount realised under Bharat 22
Since, its launch in 2017, the Bharat 22 has mobilised nearly Rs 39000 crores in three rounds till October 2019. The fourth tranche of Bharat 22 was launched in October 4, 2019. It is expected to mobilise Rs 2000 crores. According to the DIPAM, the government has decided to exercise the green-shoe option and retain the additional Rs 4,368 crore worth bids received.
Table: Mobilisation of proceeds under Bharat 22 (till October 2019)
|Tranche date||Amount (Rs crores)|
The government has raised around Rs 35,900 crore through the Bharat-22 Exchange Traded Fund from the first three tranches. This is comprised of Rs 14,500 crore was obtained in November 2017, another Rs 8,400 crore in June 2018 and Rs 13,000 crore in February 2019. The fourth tranche was launched in October 2019.
ETF route in disinvestment
Bharat 22 is a part of the disinvestment initiative. As a part of the disinvestment programme, the government approved the setting up of Exchange Traded Fund (ETF) by including the shares of listed Central Public Sector Enterprises (CPSE), some of the strategic holdings of Specified Undertaking of Unit Trust of India (SUUTI) and Public Sector Banks.
Major difference is that ETFs is a basket of different shares with assigned weights that reflects the composition of an index. ETFs cumulates shares of different companies. Being a different capital market product, the trading of ETFs in the stock market also is slightly different compared to shares.
Bharat 22 contains 22 stocks including those of central public sector enterprises, PSU banks and holdings under the Specified Undertaking of Unit Trust of India. These shares belong to the companies of six different sectors.
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 by the government.
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).
An update on October 2019
The government has so far raised around Rs 35,900 crore through the Bharat-22 Exchange Traded Fund from the first three tranches. Fourth tranche of Bharat-22 ETF was launched on October 3, which will help to get nearly Rs6,400 crore.
Proceeds from the fourth tranches of Bharat 22 will help the government meet its aggressive disinvestment target of Rs 1.05 lakh crore for the 2019-20 financial year.