A record Rs 45,080 crore via two extant ETFs — Rs 26,350 crore from CPSE ETF and Rs 18,730 crore from Bharat-22 ETF — helped the Centre mobilise 53% of the disinvestment receipts in FY19.
With exchange traded fund (ETF) route proving to be the most efficient disinvestment tool in FY19, the Centre will launch the fifth further fund offer (FFO) of the CPSE ETF with a base offer size of Rs 8,000 crore, which could be increased to Rs 11,000 crore depending on investors’ appetite.
The two-day CPSE ETF issue will open for subscription on Thursday for anchor investors and on Friday for retail investors, an official told FE.
Through the FFO4 of the CPSE ETF, the Centre had raised Rs 9,350 crore or 2.7 times of the base offer size of Rs 3,500 crore in March.
ETFs will likely to be the mainstay of the Centre’s Rs 1.05 lakh crore disinvestment programme in FY20. A record Rs 45,080 crore via two extant ETFs — Rs 26,350 crore from CPSE ETF and Rs 18,730 crore from Bharat-22 ETF — helped the Centre mobilise 53% of the disinvestment receipts in FY19. It could try to repeat the feat in FY20. Besides the two extant ETFs, it may launch three new sectoral ETFs consisting of PSUs in financial sector, energy, and metal and commodity.
The CPSE ETF was conceptualised in 2014 and Bharat-22 ETF in 2017 as an asset class, offering the benefits of diversification, risk management and lower expenses to investors.
In November 2018, the Centre had raised Rs 17,000 crore from FFO3 of of the CPSE ETF as against the base offer size of Rs 8,000 crore as retail and institutional investors put in bids worth Rs 30,899 crore.
The CPSE ETF, which charges maximum total expense ratio 0.0095% of net assets under management, has given compounded annual returns of 10.67% as on June 30, 2019.
Analysts are of the view that India’s ETF market is expected to witness robust growth in the coming years due to a structural shift in asset-class preference from fixed income to equities as interest rates moderate.