The Centre will set up a new exchange traded fund (ETF) to sell its shares in state-run as well as private companies to give a leg-up to the R56,500 crore disinvestment plan in FY17.
“The proposed new ETF will serve as an additional mechanism for the government to monetise its shareholdings in listed central public sector enterprises (CPSEs) and other corporate entities that will eventually form part of the new ETF basket,” the department of investment and public asset management (DIPAM) said while inviting applications for the post of adviser for the proposed new ETF.
Besides some blue chip CPSEs, the Centre could pool in shares owned by it in private companies such as Tata Communications, IDFC and shares held through Specified Undertaking of Unit Trust of India (SUUTI ). SUUTI holds minority stakes in Axis Bank, ITC and Larsen and Toubro.
Using an extant CPSE ETF, which invested in a pool of 10 CPSE stocks, the government raised R3,000 crore in FY14. The units of this ETF, managed by Goldman Sachs, 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.
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 would be keen to invest in Centre’s ETFs, sources said.
The proceeds from disinvestment via ETF would complement the government’s strategy to mobilise funds by selling government shares through offer for sale (OFS), initial/follow-on public offers, institutional placement programme and strategic sales.
The Centre aims to raise R36,000 crore revenue from minority stake sales in CPSEs in 2016-17. Another R20,500 crore will be raised from strategic stake sales in PSUs. So far in the current fiscal, it has raised R2,979 crore by selling shares in hydroelectricity company NHPC and Indian Oil.