Rajiv Kumar Sen in Calcutta on Friday. Picture by Kishor Roy Chowdhury
Calcutta, Sept. 6: The finance ministry will delay the launch of an exchange-traded fund (ETF) for public sector units because of the volatility in the market.
The ETF, comprising stocks of at least 10-15 listed public sector firms as underlying assets, was earlier expected to hit the market during October-November.
The cabinet committee of economic affairs had cleared the fund in May.
The product is aimed at increasing the ability of the government to monetise stakes in listed PSUs and expanding the market for ETFs, currently dominated by gold funds.
“The timing of the launch is yet to be decided because of the market conditions,” said Rajiv Kumar Sen, director in the department of disinvestment.
Sen, however, is hopeful the fund will be available by January and raise a minimum of Rs 5,000 crore.
The government has set a divestment target of Rs 40,000 crore in 2013-14 even as it is facing a lot of hurdles. It had to reduce its planned sale of a stake in SAIL by 5 per cent because of weak prices.
In Coal India, the government had to halve its sale because of pressure from the trade unions.
Sen also said the Centre was not considering an immediate initial public offering of RINL. “Even today we are not keen to go ahead with RINL.”
To attract retail investors, the ministry has approached market regulator Sebi to consider discounts and loyalty bonus on ETF
“We plan to come up with attractive discounts at the time of issue as well as loyalty bonus to the retail investor,” Sen said.
According to an official, note, “The ETF will help minimise market disruptions usually seen in public offerings of listed PSUs; being a portfolio of PSU stocks, this will lead to risk diversification (with) more retail participation, including (from) risk averse investors.”
While the constituents of the fund are yet to be decided by the empowered group of ministers, Sen said the maximum the government was planning to divest was 3 per cent of the paid-up capital of the PSU in addition to the 10 per cent mandatory public shareholding in public sector companies.
Global investment banker Goldman Sachs has been chosen as the asset management company for the proposed ETF.