CPSE ETF subscribed four times by anchor investors at Rs 6,000 cr; PSU shares rise

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Published: January 18, 2017 12:35:48 PM

Anchor investors have put Rs 6,000 crore at the end of the first day in the issue to apply for buying units against the allocated Rs 1,500 crore.

The CPSE ETF was trading 0.15% up on NSE at Rs 26.54 after opening at the day’s high of Rs 27.79, up 4.87% from the previous close.The CPSE ETF was trading 0.15% up on NSE at Rs 26.54 after opening at the day’s high of Rs 27.79, up 4.87% from the previous close.

The follow-on offer of the government’s CPSE ETF, which opened yesterday for anchor investors, got oversubscribed by three times, as per various media reports, sending shares of PSU (public sector undertaking) companies higher on strong interest for state-run units.

Anchor investors have put Rs 6,000 crore at the end of the first day in the issue to apply for buying units against the allocated Rs 1,500 crore, reports said.

The CPSE ETF was trading 0.15% up on NSE at Rs 26.54 after opening at the day’s high of Rs 27.79, up 4.87% from the previous close.

Other PSU shares also rose. BHEL was trading up 4.18%, Oriental Bank was up 1.82%, SAIL was up 1.6%, Canara Bank was up 1.58%, NALCO was up 1.31%.

The issue opened for retail investors today. Retail investors can buy the units at a discount of 5% to the institutional investors, with a minimum investment of Rs 5,000.

The government had first launched the CPSE ETF (Central Public Sector Undertakings Exchange Traded Fund) 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. 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 government has launched the follow-on public offer for this CPSE ETF in order to help add to its disinvestment kitty. The proposed fund-raising of up to Rs 6,000 crore, including a greenshoe option of Rs 1,500 crore, will help the government meet its target of raising Rs 56,000 crore via selling its equity stake in public sector undertakings this financial year.

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Earlier this week, Disinvestment Secretary Neeraj Kumar Gupta said that the CPSE ETF has given strong returns at 14.4% CAGR since inception, as compared to 8.9% for the benchmark NSE Nifty. He added that he expects a further strong upside in the CPSE ETF.

It has indeed constantly outperformed the broader markets, outperforming 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, 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.

Neeraj Kumar Gupta said the ETF is the best bet to deal with market volatility, as it offers tradability like equity and stability like a mutual fund, adding that the developed markets prefer ETFs over the offer for share sale (OFS).

 

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