CPSE exchange-traded fund opens; govt to raise Rs 3,000 crore
New Delhi: Looking to raise Rs 3,000 crore for the government, the exchange-traded fund (ETF) of select central public sector enterprises opened Tuesday for subscription by investors.
The CPSE ETF is an open-ended scheme that consists of shares of 10 major public sector units, including Oil & Natural Gas Corporation, GAIL India and Coal India.
The new fund offer opened today for subscription by anchor investors (investing above Rs 10 crore) and will open tomorrow for non-anchor and retail investors. The offer for non-anchor investors closes on March 21.
"Though ETF is a very popular investment vehicle globally, it is at a nascent stage in India. Also, equity ETFs are yet to gain traction here. Through the CPSE-ETF, the government is trying to make this product popular," Alok Tandon, Joint Secretary in the Department of Disinvestment, told reporters here.
The new index is another option for the government to divest stake in public sector firms, he said at an event organised by Goldman Sachs Asset Management Company here.
The government plans to raise up to Rs 3,000 crore from this scheme in the current financial year, Tandon said.
The success of the scheme would ensure the government meets the disinvestment target of Rs 16,000 crore.
The scheme provides an opportunity for investors to be part of the top 10 PSUs - ONGC, Gail, Coal India, Indian Oil, Oil India, Power Finance Corp, Rural Electrification Corp, Container Corp, Bharat Electronics and Engineers India.
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.
While a 5 percent upfront discount would be offered to all classes of investors, one loyalty unit will be allotted for every 15 units held by eligible retail individual investors.
The scheme is managed by Goldman Sachs India MF and will be listed on exchanges in the form of an ETF.
The CPSEs under the index have more than 55 percent government holding under the promoter category and an average free-float market capitalisation of more than Rs 1,000 crore for the six months ended June 2013.
Assets under management of ETFs in India have gone up to Rs 11,807 crore in September 2013 from Rs 1,396 crore in March 2009.