CPSE ETF II on anvil; initial corpus Rs 6,000 cr




By FC Bureau Dec 28 2016 , New Delhi



The government is set to launch the second exchange-traded fund (ETF) soon to expedite dilution of its stakes in listed PSUs, as well as in companies held through SUUTI. The new ETF is estimated to have an initial corpus of Rs 6,000 crore, which might increase later. The list of participating PSUs would be finalised later.

An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. The government has decided to launch a new CPSE ETF, as it is unable to introduce changes to make the existing one more investor-friendly, pending regulatory clearance for transfer of fund management to Reliance Capital Asset Management (RCAM) from Goldman Sachs after the latter sold off its Indian mutual fund business. RCAM took over Goldman Sachs' mutual fund business in India for Rs 243 crore in October last year.

The department of investment and public asset management (DIPAM) on Tuesday invited bids from "domestic law firms with international consortium to act as legal advisor to assist and advise the government". Offers are to be submitted by January 18.

After the appointment of legal adviser, the DIPAM will go ahead with a new fund offer (NFO) of the proposed ETF, which may happen sometime in the last quarter of this fiscal.

"The proposed new ETF will serve as an additional mechanism for the government to monetise its shareholdings in listed CPSEs and other corporate entities that will eventually form part of the new ETF basket," DIPAM said.

The government had launched the first CPSE ETF in March 2014, comprising shares of 10 PSUs, which had garnered Rs 3,000 crore for the exchequer.

The government has set a disinvestment target at Rs 56,500 crore for 2016-17. Of this, Rs 36,000 crore is to come from buyback and minority stake sale in PSUs and Rs 20,500 crore from strategic sale.

So far, the government has raised nearly Rs 24,000 crore from share buy back and minority stake sale.

The first ETF basket includes shares of 10 listed PSUs — ONGC, GAIL India, Coal India, Indian Oil, Oil India, Power Finance Corp, Rural Electrification Corp, Container Corp, Engineers India and Bharat Electronics.

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