Why many investors did not get all the Bharat 22 ETF units that they wanted
Usually, when you invest in a mutual fund’s new fund offering (NFO), you get units worth all the money you had put in. Not in the case of Bharat 22 Exchange Traded Fund (B22 ETF) by ICICI Prudential Asset Management Co. Ltd. It’s an unusual scenario in an NFO, but for a reason.
The ETF route
B22 ETF is a vehicle through which the Government of India has chosen to disinvest its stake in 22 companies; 19 are state-owned and three are from the private sector in which the government has a stake. In the state-owned companies, the government owns a majority stake.
However, as part of its divestment programme, the government has consistently divested chunks of its shares in these companies to the general public. In the past few years though, it has chosen the ETF vehicle to do so, instead of divesting in one company at a time.
After the successful launch of the Central Public Sector Enterprises (CPSE) ETF in May 2014 and two subsequent follow-on offers (January and March 2017), where the government of India has divested stocks worth about Rs11,500 crore in all so far, this time the government chose to divest shares in another basket of 22 companies through the B22 ETF.
In every such case of divestment, supply of stocks is limited. While the government holds a large stake, it wouldn’t necessarily sell everything in one shot. It would sell in parts, as and when it wishes to raise money.
This time, through the B22 ETF, the government had chosen to divest stocks worth about Rs8,000 crore, which was the NFO size. But on account of the good sentiment seen in the equity markets these days, B22 ETF got subscriptions worth Rs31,817 crore. The government has decided to retain Rs14,500 crore and return the rest to subscribers.
Who got, who didn’t?
B22 ETF was made available to four sets of subscribers: anchor investors, retail investors (up to Rs2 lakh), retirement funds, and qualified institutional buyers or QIBs (more than Rs2 lakh; which includes high net worth individuals).
Each segment was eligible for 25% allotment to the overall issue size, ie., stocks worth Rs2,000 crore. As the government decided to retain Rs14,500 crore, the retail and retirement funds categories got full allotment (see table).
So, if you had subscribed up to Rs2 lakh in the B22 ETF, you would have got everything. The QIB category got subscriptions worth Rs14,021 crore, but the government release just Rs3,625 crore for this segment. If you had invested more than Rs2 lakh (the QIB category was open to individual investors too), then you would have got partial allotment. The fund house would have sent an email and an SMS on your mobile phone intimating how much you had subscribed and how much you got.