1. CPSE ETF slated for Rs 6k cr follow on public issue a constant market outperformer

CPSE ETF slated for Rs 6k cr follow on public issue a constant market outperformer

The CPSE ETF, for which the government is learnt to be launching a follow on public offer next week, has constantly outperformed the broader markets over the last one year.

By: | Updated: January 11, 2017 6:46 PM
bse-sensex-l-reuters The exchange-traded fund – mandated to invest in 10 marquee public sector undertakings – has outperformed the BSE Sensex by 19.2% in one year; 24% in six months; 10.7% in three months; and 2% in one month.

The CPSE ETF, for which the government is learnt to be launching a follow on public offer next week, has constantly outperformed the broader markets over the last one year. The exchange-traded fund – mandated to invest in 10 marquee public sector undertakings – has outperformed the BSE Sensex by 19.2% in one year; 24% in six months; 10.7% in three months; and 2% in one month.

The government plans to garner up to Rs 6,000 crore by selling units of the fund in a follow on public issue. “The issue size of follow-on fund offer is Rs 4,500 crore with a greenshoe option of Rs. 1,500 crore,” a senior government official was quoted as saying earlier today.

As much as 5% discount will be given to institutional investors, and the allotment priority will be given to retail investors and pension funds, the official added. The government had first launched the CPSE ETF three years ago in March 2014, where it raised Rs 3,000 crore through the initial public offering. The retail investors could buy into the fund by investing a minimum Rs 5,000.

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The fund invests in ONGC, Coal India, Indian Oil Corp, Gail India, Oil India, Power Finance Corp, Bharat Electronics, Rural Electrification Corp, Engineers India and Container Corporation of India.

The fund-raising exercise will help the government add to its disinvenstment kitty and help it meet the target of raising Rs 56,000 crore. The government has already raised Rs 24,000 crore in the current financial year through share sale and share buyback by the companies.

The CPSE ETF, which mirrors the performance of the CPSE index, has given impressive effective returns at over 70% since inception to the original investors, helped by bonus units and allotment discounts.

While the CPSE ETF trades at a much lower PE multiple of 11.44, compared to Nifty’s 22 times, its low expense ratio of 0.065% prevents the costs into the gains for the investors.

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