Modi government launches new PSU exchange-traded fund Bharat-22 in a boost to disinvestment drive

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Updated: August 5, 2017 11:22:53 AM

The government has announced the launch of Bharat-22 -- a new ETF (exchange-traded fund) of 22 companies -- buoyed by the encouraging response to its earlier CPSE ETF -- a fund of 10 state-run companies, in a significant boost to its disinvestment drive.

The new Bharat-22 ETF will have 22 companies, including some holdings of the government’s investment arm SUUTI, with a single company cap at 15%, and a sectoral cap at 20%.

The government seems to be leaving no stone unturned in its effort to maximise its earnings from disinvestment of equity stakes in PSUs this year. Just after the news report on Friday morning about the proposal to divest 25% equity stake in four defence companies through IPOs, the government has announced the launch of Bharat-22 — a new ETF (exchange-traded fund) of 22 companies — buoyed by the encouraging response to its earlier CPSE ETF — a fund of 10 state-run companies. Shares of most large PSUs surged on Friday on the news. Nifty CPSE index surged 2.46% to 2,458.1 at Friday’s close, while Nifty Energy rose 0.94% to 13,203.65 points, led by gains in Indian Oil Corp, Hindustan Petroleum Corp Ltd, and other refiners.

The new Bharat-22 ETF will have 22 constituents, including some holdings of the government’s investment arm SUUTI (Specified Undertaking of Unit Trust of India), with a single company cap at 15%, and a sectoral cap at 20%, Finance Minister Arun Jaitley said on Friday. The government arm SUUTI holds equity stakes in over 50 companies, including large holdings in L&T, ITC and Axis Bank, earlier held by the erstwhile Unit Trust of India before its breakup. SUUTI’s equity stakes in L&T, ITC and Axis Bank alone are valued at above Rs 50,000 crore.

Also read: What is Bharat-22? How is it different from CPSE ETF?

The government had first launched a CPSE ETF (Central Public Sector Undertakings Exchange Traded Fund) over 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. Following this, the government launched two follow-on public offers in February and March this year, raising Rs Rs 8,500 crore. The CPSE ETF, which mirrors the performance of the CPSE index, invests in 10 PSUs, namely, 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.

Indian government has undertaken strategic stake sale in profitable PSUs to help boost state revenue and bridge the fiscal deficit. It has an ambitious target to earn Rs 72,500 crore in the current financial year 2017-18 through sale of stake in state-run companies, of which it has raised Rs 9,300 crore so far, Arun Jaitley said. The government raised Rs 46,247 crore through disinvestment In the last financial year 2016-17, the highest ever amount earned by sale of equity stake in PSUs, though falling short of the original target, as was expected.

So far this financial year, the government has sold equity stakes in Hindustan Copper through a recently concluded OFS (offer for sale), Cochin Shipyard, HUDCO, L&T (held through SUUTI) and Dredging Corporation, among others. This fiscal, the government seeks to sell 10% equity stake each in three major state-run railway companies IRCTC, Ircon and IRFC via IPOs. The Union Cabinet has also approved listing of five state-run general insurance companies, which is likely to begin only in the next financial year with the first listing possible by September-October. The government is also reportedly looking at selling 10% equity stakes each in the capital goods major Bharat Heavy Electricals Ltd and energy company Oil India Ltd.

(First published on Friday, 4 August 2017 on www.financialexpress.com)

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