Edelweiss AMC leading race to grab deal to operate govt's debt ETF

Edelweiss Asset Management has emerged as the front-runner to create, manage and launch the government's maiden debt exchange-traded fund (ETF), an official said Thursday. Others in the race were SBI Funds Management, Reliance Nippon Life Asset Management, UTI Asset Management Company and Aditya Birla Sun Life AMC. "We are delighted to be the highest scorer in the bid to manage government's debt ETF. We look forward to the written confirmation from the government, which is expected by early next week," Edelweiss Asset Management Chief Executive Officer Radhika Gupta said.

All the five entities in the race were invited by the Department of Investment and Public Asset Management (DIPAM) to make a presentation for the planned debt ETF Thursday, according to the information available on the department's website. The selected AMC would 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.

The debt ETF would comprise bonds, credit-linked note, debentures, promissory notes as underlying instruments issued by participating CPSEs/PSBs/PSUs. The proposed ETF may also include government securities (G-Secs). Finance Minister Arun Jaitley in Union Budget 2018-19 announced plans for a debt ETF, following the success of equity ETFs such as CPSE ETF and Bharat-22 ETF. To give effect to this, DIPAM in November invited bids from mutual funds or asset management companies (AMCs) for the proposed debt ETF.

The debt ETF would help the state-run companies meet the capital expenditure and business needs by leveraging their aggregate strength. This will bring enhanced liquidity, 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 account for 79 per cent of the total amount of outstanding bonds in India.