The Telegraph
Friday , January 10 , 2014
CIMA Gallary

ETF for public units likely next month

New Delhi, Jan. 9: A group of ministers is likely to meet later this week to approve the proposal for setting up a PSU exchange traded fund (ETF), which could be launched next month.

The ETF will be a basket of shares of listed PSUs and investments in it are expected to minimise the risk for investors. It will also be easier for the government to sell new offerings by getting the fund to buy some part of the stocks on offer.

Earlier last year, Goldman Sachs Asset management was appointed to launch the fund.

The official note on the subject also supports the move. “It will be a transparent monetisation vehicle, which could be used on an ongoing basis. The PSU ETF would help minimise market disruptions usually seen in public offerings of listed PSUs,” it states.

“Being a portfolio of PSU stocks, this will lead to risk diversification (with) more retail participation, including (from) risk averse investors. In the perspective of success of ETFs globally, creation and launch of PSU ETF will boost the ETF product in the country.”

The ETF is being planned on the lines of Singapore’s STI ETF that invests in blue-chip firms most of which have substantial government holdings and are considered safe bets.

Officials point out that the greater interest in initial public offerings of PSUs is a confirmation of the fact that investors want a safe and steady investment option, which the ETF is likely to offer.

Coal India Ltd received IPO applications from around 15.9 lakh people, the highest since 2003-04.

The Power Finance Corporation offer was subscribed 76.7 times.

This trend has encouraged mutual funds to invest in PSU shares.

The government seeks to raise Rs 40,000 crore through the sale of shares in state-run firms this financial year.