Bharat-22 ETF –  FFO 2 (Tranche 4) – Oct 2019 Issue Review

Bharat 22 ETF FFO 2 - Tranche 4 - Oct-2019 ReviewBharat-22 ETF –  FFO 2 (Tranche 4) Review


Bharat-22 ETF FFO 2 (Tranche 4) would open for subscription on 3rd October, 2019. Bharat-22 Exchange Traded Fund (ETF) consists of 22 blue chip stocks including public sector companies where Govt of India has a minority stake. The Bharat 22 ETF is the second ETF from Govt. of India after CPSE ETF. What is a Bharat 22 ETF? What stocks are part of this ETF? How is the Performance of Bharat 22 ETF post the launch of Tranch-I and Tranche-III? Should you invest in Bharat-22 ETF FFO 2 of Oct 2019?

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What is an Exchange Traded Fund (ETF)?


In simple terms, an ETF is an exchange-traded fund (ETF) which is comprised of specific stocks.  If stock prices go up or down, ETF NAV would also fluctuate. It simply reflects the underlying stocks of the ETF.

What is a Bharat-22 ETF Index?


Bharat 22 ETF was launched in November, 2017 as part of Govt of India Disinvestment plan last year.

Bharat-22 ETF is where 22 public sector companies are part of this Index. ICICI Pru AMC is the ETF Manager for Bharat 22 ETF Index. Govt of India is planning to disinvest, hence this FFO 2 launch.

Features of Bharat 22 ETF FFO 2 (Tranche 4)


Bharat 22 ETF FFO 2 would open for subscription on 3rd October, 2019 for anchor investors and on 4th October for non anchor investors and closes on te same day.

Bharat-22 ETF Index consists of a diversified portfolio of 22 Blue Chip Stocks.

This ETF consists of state owned companies like ITC, L&T, Axis Bank, SBI,  Power Grid Corporation etc.

This ETF also consists of companies where Govt of India includes partial stakes like Axis Bank, ITC, Larsen and Toubro etc.,

This ETF also consists of blue chip stocks owned by Govt. India through its holdings through Specified Undertakings of the Unit Trust of India (SUUTI).

Current Bharat-22 ETF NAV is Rs 35.4 per unit as on 27th September, 2019. Its NAV during last tranche (11th Feb 2019) was Rs 33.74 per unit.

This ETF NAV would go up or down based on the share prices of 22 underlying stocks under this ETF.

You can download Bharat 22 ETF Tranche 4 Prospectus from this SEBI link.

Who is managing the Bharat-22 ETF?


Ministry of Finance has appointed ICICI Prudential AMC as ETF Manager for this fund.

What sectors are part of this Bharat-22 ETF Portfolio?


Bharat-22 ETF consists of Energy, Financial Sector, FMGC Sector, Industrial segment and Utilities segment.

Which stocks do Bharat 22 ETF Portfolio contain?


Bharat ETF would span across 6 sectors and consists of 22 stocks. This ETF cannot invest more than 20% in a single sector. Also, this ETF cannot invest more than 15% in one particular stock. Here is the list of stocks under Bharat 22 ETF Index during 2nd week of September, 2019.

Bharat 22 ETF FFO 2 - Index constituents as on 2nd week of September 2019

Reasons to invest in Bharat-22 ETF of Tranche 4


1) Bharat 22 ETF stocks consists of 22 public sector companies where Govt of India has a minority of the stake. This is a good investment plan if someone wants to invest in high future growth potential companies for the long term.

2) This invests across 6 sectors, hence greater diversification.

3) This ETF has stable growth sectors like FMCG and Utilities. It also has cyclical sectors like energy and metals which give high diversification.

4) Attractive dividend yield and valuations.

5) All Investors would get a 3 % discount on the NAV.

Reasons not to invest in a Bharat-22 ETF Follow-on Fund Offer


1) Bharat 22 ETF which was launched in November 2017 and currently trading at 1% less than the issue price.

2) BHARAT 22 ETF is only the name of the Scheme and does not in any manner indicate either the quality of the Scheme or its future prospects and returns.

3) As the price/value/interest rates of the securities in which the Scheme invests fluctuate, the value of your investments in the Scheme may go up or down.

4) BHARAT 22 ETF is an Exchange Traded Fund (ETF). There can be no assurance that an active secondary market will develop or be maintained.

5) Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved.

6) The NAV of the Scheme may be affected by changes in the general level of interest rates and trading volumes.

7) The NAV of the Scheme may be affected by settlement periods and transfer procedures.

8) In the event of receipt of inordinately large number of redemption requests or of a restructuring of the Scheme‟s portfolios, there may be delays in the redemption of Units.

9) The Liquidity of the Scheme‟s investments is inherently restricted by trading volumes.

10) Investors in the Scheme are not being offered any guaranteed returns.

11) The past performance of the mutual funds managed by the Sponsors and their affiliates/associates is not indicative of the future performance of the Scheme.

12) Investment decisions made by the AMC may not always be profitable.

23) You can read complete risk factors indicated in the prospectus.

How to subscribe to Bharat-22 ETF FFO?


If you have a demat / mutual fund account, you can visit IPO/NFO/FFO section of your account and locate Bharat ETF FFO 2 link. You can select the same and indicate the amount and submit the same.

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How was the performance of Bharat 22 ETF till now?


Here is the performance of this ETF till now

1) Bharat 22 ETF Tranche-1 was launched in Nov 2017. Bharat 22 ETF current NAV is Rs 35.4 which is 1% lower than the issue price. However, since the Govt of India has issued them 3% discount, retail investor would be in profit for 2% in the last 2 years.

2) Bharat 22 ETF Tranche 3 was launched in Feb-2019 where the NAV was around Rs 33.74 which would have given around 5% return beyond retail discount indicating overall returns of around 8%.

Should you invest in a Bharat-22 ETF FFO 2 in Oct 2019?


Bharat 22 ETF Index has not performed well in the last 22 months after
Tranche-I was launched. The returns are 1% negative compared to Tranche-I that came in Nov-2017. It gave 8% returns after Tranche-III that came in Feb-2019. Liquidity is also an issue. There is no high confidence that such underlying stocks would perform well in near future. My advice is that investors should stay away from such high risk investment options and invest in the top mutual fund schemes that may fetch good returns.  

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Suresh KP

Bharat-22 ETF-  FFO 2 (Tranche 4) – Oct 2019 Review

5 comments

  • Maheshwar

    Thanks for this information, but this is very new to me, can you please clarify the below-
    – Can we invest we have only Demat A/c?
    – Redemption of Principal – Does this get auto transferred to the bank account or does it need to be traded?
    – when are Returns credited? Is it yearly?
    – Taxability – Is returns exempt? Does Principal does 80C deduction?

    • Hello Maheshwar, Good to hear that you are new investor. Here are my comments on your queries 1) Since these are ETFs, you can invest only if you have demat account 2) If you wish to redeem, you need to sell the ETFs, the amount would be credited back to your registered bank account. 3) Capital along with capital appreciation / depreciation (there could be negative returns too here) would be credited in 2-4 working days which would depend on which day you sell these ETFs 4) These are not ELSS funds, hence you would not get any 80c benefit. The tax liability would depend on when you sell i.e. < 1 year is STCG and > 1 year is LTCG

  • sheetal

    Thanks for sharing descriptive analysis Sureshji.. 🙂 Diwali is coming, do you have any plans to recommend good equity stocks, which can provide good returns in longer term.

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