After a gap of nearly three years, the Centre will raise up to Rs 6,000 crore through a follow-on fund offer of an extant CPSE exchange traded fund (ETF) this fiscal. The issue will be open for subscription from January 17 to 20.
“The ETF FFO issue size (is of) R4,500 crore; plus green shoe option of R1,500 crore,” an official said.
As much as 5% discount would be given to investors while the issue would be open for anchor investors on January 17. Priority would be given to retail and pension funds at the time of allotment, the official added.
The CPSE ETF’s NAV/unit was R26.1 on January 9.
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The fund-raising via ETF would help the government to move closer to the Rs 56,500-crore disinvestment revenue target for the current fiscal year. So far in FY17, it has raised R23,529 crore through a mix of share sales and buybacks.
Using the extant CPSE ETF, which invested in a pool of 10 CPSE stocks, the government had raised R3,000 crore in March 2014. The units of this ETF, now managed by Reliance Mutual Fund, saw capital appreciation of 40% in the first year after debuting on March 28, 2014, giving a positive narrative to officials to push for more ETFs.
Since inception, the fund has given annualised returns of 15.15% (non-retail category) as compared with 12.09% generated by Nifty 50. In the same period, the retail investors received 17.96% after adjusting for loyalty units.
ETF is seen as a safer bet to invest in equities compared to individual stocks which are vulnerable to fluctuations in the market. Besides retail investors, the Employees’ Provident Fund Organisation and pension funds under the National Pension System could be keen to invest in the Centre’s ETF.
CPSE ETF comprised scrips of 10 PSUs — ONGC, Coal India, IOC, Gail India, REC, Engineers India, Container Corporation of India, Oil India, PFC and Bharat Electronics.
Apart from the FFO of extant CPSE ETF, the Centre is also in the process of launching a new ETF comprising stocks of PSUs as well as some of its holdings in private companies in the current fiscal year. It could fetch R5,000-R6,000 crore.