The first ever target maturity fund in the Indian mutual fund industry- Bharat Bond April 2023, is maturing next month. Edelweiss Mutual Fund has decided to merge the Bharat Bond ETF 2023 and FoF with Bharat Bond ETF 2025, the next scheme in the series. The market regulator, Sebi, has approved the merger. As per the Income Tax Act, 1961 these mergers will not result in capital gain/loss for the merging schemes but will be treated as a continuous investment into the next scheme.
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Bharat Bond ETF-April 2023 and the FOF both were launched in December 2019 and have given investors an annual return of 6.5% since inception. The ETF manages a total AUM of Rs 7,800 crore, while the FoF has assets of Rs 4,200 crore. The annualised portfolio YTM of the Bharat Bond ETF 2025 and Bharat Bond FoF 2025 is stated to be 7.84%, as on March 9. The Macaulay Duration of the portfolio is 1.87 years and the residual maturity is 1.98 years.
According to the fund house, the investors in the Bharat Bond ETF 2023 and Bharat Bond FoF 2023, will benefit from current higher yield in the continuing scheme and will gain additional indexation benefit which will ultimately reduce your tax burden. The fund house has sent a letter to its investors conveying the merger and the steps they can follow.
“We would like to inform you that the Board of Directors of Edelweiss Asset Management and Edelweiss Trusteeship Company Limited, the Investment Manager and Trustee Company, respectively, of Edelweiss Mutual Fund, have approved the merger of Bharat Bond ETF – April 2023 (An open-ended Target Maturity Exchange Traded Bond Fund predominately investing in constituents of Nifty BHARAT Bond Index - April 2023. A moderate interest rate risk and relatively low credit risk with Bharat Bond ETF – April 2025. Post the closure of business hours on the date of the maturity of the Merging Scheme i.e. April 17, 2023,” the letter said.
The earlier scheme will be delisted two working days prior to the maturity date- April 12, 2023 for which necessary circulars will be issued by the exchanges. If you do not have an objection to the proposed merger, then you will have to submit a consent form to the AMC.
The investors who do not want to continue in the merged scheme will be given an exit option. Since the merger amounts to change in fundamental attributes, existing unit holders of the Bharat Bond ETF and FoF 2023 are provided an option to exit, at the prevailing NAV without an exit load.
The fund house said in its communication with investors that the offer to exit is purely optional and not compulsory. “If the unit holders of Bharat Bond ETF April 2025 have no objection to the aforesaid merger, no action is required to be taken and it would be deemed that such unit holder has consented to the merger of the scheme. Unit holders of both schemes who do not exercise the exit option on or before April 12, 2023 would be deemed to have consented to the proposed merger,” the communication noted.
The fund house also said that there will be no change in transferee scheme- Bharat Bond ETF – April 2025 post merger. There will be no change in the name or other attributes of the transferee scheme.
