Edelweiss Mutual Fund announces merger of Bharat Bond ETF – April 2025 with Bharat Bond ETF – April 2030

Edelweiss Mutual Fund has approved the merger of BHARAT Bond ETF – April 2025 with BHARAT Bond ETF – April 2030.

The effective date of merger is April 15. The fund house informed about this merger to the unitholders through a notice-cum-addendum.

Bharat Bond ETF – April 2025 is the merging scheme and Bharat Bond ETF – April 2030 is the transferee scheme.

BHARAT Bond ETF – April 2025 is an open-ended target maturity exchange traded bond fund predominately investing in constituents of Nifty BHARAT Bond Index – April 2025 with a moderate interest rate risk and relatively low credit risk. BHARAT Bond ETF – April 2030 is an open-ended target maturity exchange traded bond fund predominantly investing in constituents of Nifty Bond Index – April 2030 with a relatively high-interest rate risk and relatively low credit risk.

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The fund house has provided a period for providing consent / option which will be open from March 10 to April 8 (both days inclusive).The advantage of extended maturity with the same nature of underlying instrument is that the merging scheme predominantly invests in constituents of Nifty BHARAT Bond Index – April 2025 and the transferee scheme predominantly invests in constituents of Nifty BHARAT Bond Index – April 2030. Both these indices are part of the same Nifty BHARAT Bond Index Series, the nature of the underlying constituents being AAA rated bonds issued by government owned entities.The benefit of current higher interest rates is the transferee scheme has a maturity date of April 2030. Given the current interest rate scenario, the merger may help investors of the Merging Scheme to take advantage of the prevailing higher interest rates if they continue to stay invested in the Transferee Scheme until its maturity date.

The investors of the merging scheme will be able to avail long term capital asset status for their investments and benefit from reduced tax liability at the time of redemption from the transferee scheme, provided a combined holding period of greater than 12 months.

Unit holders of the merging scheme who provide consent for the merger will be allotted units under the transferee schemes at the Net Asset Value on the effective date of the merger. The units allotted to the unit holders in the transferee scheme shall be treated as fresh subscriptions in the transferee scheme.

Upon allotment of units in the transferee scheme, all provisions under the transferee scheme will apply. However, the period of holding for the purpose of exit load, if any, will be computed from the date of allotment of corresponding original units in the merging scheme.

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The merging scheme will be delisted two working days prior to the maturity date i.e. April 15, 2025 for which necessary circulars will be issued by the exchanges. Since all the units are in demat mode, the unit holders of the Merging Scheme having no objection to the proposed merger in the transferee scheme and wishing to remain invested, need to submit their consent with the AMC through online/physical mode.

Units of the unitholders who do not provide their consent for the merger will be redeemed at applicable NAV on the maturity date. The maturity proceeds will be paid to investors within T+3 working days. In case of consented investors, unit balance in the merging scheme as on the date of merger will be considered for executing the transfer into transferee scheme.

It may however be noted that the offer to exit is purely optional and not compulsory. If the unit holder has 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.

As per section 47(xviii) of the Income-tax Act, 1961, allotment of units in transferee scheme, pursuant to merger, to unit holders of merging scheme who decide to continue will not be considered as redemption of units in merging scheme and will not result in short term/long term capital gain / loss in the hands of the unit holders.

Further, the period for which the units in the merging scheme were held by the unit holders will be included in determining the period for which such units were held by the unit holder and the cost of acquisition of units allotted in transferee scheme pursuant to merger will be the cost of acquisition of units in merging scheme.

A separate written communication, containing the prescribed information in this regard will also be sent to the existing unit holders of the merging scheme and transferee scheme.

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