New Delhi: Edging out four other competitors, Edelweiss Asset Management has emerged as the frontrunner to create, manage and launch India’s very first debt Exchange Traded Fund (ETF), industry insiders said. The other competitors who were in the fray included SBI Funds Management, Reliance Nippon Life Asset Management, UTI Asset Management Company and Aditya Birla Sun Life AMC. The five asset management companies (AMCs) were invited by the Department of Investment and Public Asset Management (DIPAM) to make their pitches for the planned ETF on January 3.
Edelweiss, which emerged as the winner, will work with the government and the advisors in all aspects of creating, launching and managing the proposed debt ETF, including all funds from operation (FFO), tranche and additional offering.
What does the debt ETF comprise?
The debt ETF would comprise bonds, credit-linked note, debentures, promissory notes as underlying instruments issued by participating CPSEs/ PSBs/PSUs. The proposed debt ETF may also include government securities (G-Secs).
Taking a cue from the success of equity ETFs like CPSE ETF and Bharat-22 ETF, the plan to create a debt ETF had been announced by Finance Minister Arun Jaitley in his 2018-19 Budget speech.
DIPAM had invited bids from AMCs or mutual funds for the same in November last year.
The debt ETF was planned to help public sector undertakings (PSUs) meet the capex and business needs by leveraging their aggregate strength. This is expected to bring enhanced liquidity, improve investors’ base and transparency of the participating central public sector enterprises (CPSEs).
In India, the corporate bond market constitutes a relatively small size of around 13 per cent in terms of the GDP as compared to the government bond market, which is around 30.4 per cent in terms of the GDP. The debt market consists of the G-Sec market and the corporate debt market.
The G-Secs accounts for 79 per cent of the total amount of outstanding bonds in India.