Govt invites proposals from mutual funds for PSU ETF
New Delhi: Moving ahead with its proposal to set up an exchange traded fund for PSUs, the government has invited proposals from mutual funds having equity assets of over Rs 2,500 crore.
The Department of Disinvestment (DoD) said the mutual funds meeting the prescribed eligibility criteria can submit by January 24 the proposals for setting up the Exchange Traded Fund (ETF).
The MFs which are registered with SEBI and have at least five years experience would be eligible for setting up ETFs, the department said, adding the fund houses would be responsible for conducting roadshows for the share sale through ETF.
The average equity/ETF assets under management of the MFs should not be less than Rs 2,500 crore at the end of July-September quarter, the DoD said.
The proposed ETF, which would be based on a basket of shares of 20 profit-making CPSEs, is aimed at obtain better price for equity of state-owned companies during the disinvestment process.
The 20 companies would include blue chip PSUs like ONGC, Indian Oil, Power Finance Corporation, NTPC, NMDC and BHEL.
Last year, government had appointed ICICI Securities as the advisor to set up the ETF. It will select and appoint one Asset Management Company (AMC) with experience and expertise in the launch and management of equity MFs/ETF schemes.
The proposed PSU ETF will serve as an additional mechanism for the government to monetise its shareholdings in those CPSEs that eventually form part of the ETF basket.
"The CPSE ETF could be launched as a New Fund Offer (NFO) followed by further tranches and the government may provide appropriate discount for different investors," the DoD said while inviting bids from MFs.
The PSU ETF, which is being planned on the lines of the Hong Kong Tracker Fund, would help government speed up its disinvestment plan.
The DoD is in the process of floating a Cabinet note seeking comments of Ministries on setting up of ETF.
An ETF tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
ETFs were introduced in India in 2001. Currently, there are 33 ETFs having AUM of close to Rs 11,500 crore and held by 6.2 lakh investors. Gold ETFs dominate ETF market in India.
Globally, ETFs have been growing at a rapid pace with an annual growth rate of over 34 percent in the last decade, with Assets Under Management of USD 1.5 trillion at present.