ETF prop for selloff

ETF offer likely to fetch the Centre about Rs 3,500 crore. The proceeds can be maximised depending on investors’ appetite

By R. Suryamurthy in New Delhi
  • Published 16.03.19, 12:16 AM
  • Updated 16.03.19, 12:16 AM
  • a min read
  •  
The board of Power Finance Corporation will meet soon to approve a buyout of the shares of Rural Electrification Corporation at a premium. (Shutterstock)

The race to meet the Rs 80,000-crore divestment target for the current fiscal will largely depend on the CPSE-Exchange Traded Fund (ETF) to be launched next week. Besides, the board of Power Finance Corporation will meet soon to approve a buyout of the shares of Rural Electrification Corporation at a premium.

The ETF offer is likely to fetch Rs 3,500 crore and can be increased depending on the investors’ appetite, a senior finance ministry official said.

Officials said the ETF was likely to open for subscription on March 19 and would close on March 22.

“The additional amount over and above the base size of the ETF issue could be retained by the Centre, depending on over-subscriptions,” the official said.

So far, the government’s divestment offers through the ETF route have been quite a hit, while the individual PSU sales have flopped. When the government offloads minority stakes in individual PSUs, the response depends heavily on the fortunes of the sector.

Receipts from three ETF issues stood at Rs 35,730 crore or 63 per cent of the total divestment receipts of Rs 56,473 crore in the current fiscal.

The Department of Investment and Public Asset Management hopes to not just reach the target but cross it in the current fiscal if the PFC buy-out of REC happens by this month and ETF gets an enthusiastic response.

The CPSE (central public sector enterprises) ETF comprises the shares of 11 companies — ONGC, Coal India, IOC, OIL, Power Finance Corporation, REC and Bharat Electronics. NTPC, SJVN, NLC and NBCC are the new entrants in the ETF basket.

The CPSE ETF, managed by Reliance Nippon Mutual Fund, tracks the Nifty CPSE Index made up of 11 PSU stocks from the energy, metals, financial services and industrial segments.