Disinvestment boost: Centre nets Rs 10,000 crore via CPSE ETF

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Updated: July 20, 2019 7:05:29 AM

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.

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.

Giving a boost to disinvestment receipts, the Centre on Friday raised over Rs 10,000 crore on a net basis from the 5th further fund offer (FFO) of the CPSE ETF. The two-day ETF issue garnered over Rs 40,000 crore bids from investors, of which Rs 11,500 crore were accepted, an official said. However, the receipts to the Centre would be lower by Rs 1,500 crore due to purchase of Indian Oil shares from market to maintain the stock’s weight in the index as the government’s stake in the company is at the threshold of 52% (a norm applicable to all the stocks in the index). With the mobilisation through the CPSE ETF, the Centre has raised about Rs 12,400 crore so far in FY20 or 12% of the full year disinvestment revenue target of `1.05 lakh crore.

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 as well. 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, offering the benefits of diversification, risk management and lower expenses to investors. 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. 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.

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.

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