Strong institutional interest for CPSE ETF FPO, says manager as anchor buyers overbid 7.5 times

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Updated: March 15, 2017 2:20:03 PM

CPSE ETF’s manager Reliance Nippon Life Asset Management said on Wednesday that it is seeing strong response from FIIs (foreign institutional investors) and DIIs (domestic institutional investors) for the fund’s follow-on public offer.

The third tranche of the government’s exchange-traded fund of public sector enterprises opened yesterday for anchor investors, garnering 7.5 times the subscription for the reserved portion.

CPSE ETF’s manager Reliance Nippon Life Asset Management said on Wednesday that it is seeing strong response from FIIs (foreign institutional investors) and DIIs (domestic institutional investors) for the fund’s follow-on public offer. The third tranche of the government’s exchange-traded fund of public sector enterprises opened yesterday for anchor investors, garnering 7.5 times the subscription for the reserved portion. The issue opened for retail investors today.

“Response for CPSE ETF reflects confidence in India growth story,” Sundeep Sikka, Executive Director and CEO, Reliance Nippon Life, said in an interview to ET Now. Sikka also said he expects to see stronger retail participation compared to last time, ET Now reported.

This is the third tranche of the CPSE ETF. Earlier this year, the government had raised Rs 6,000 crore in the first follow-on offer (second tranche) of the fund.

Yesterday, anchor investors including BNP Paribas, Morgan Stanley, SocGen, CitiGroup, LIC, Exide Insurance, SBI, Axis Bank and Canara Bank put in bids worth Rs 5,700 crore against the Rs 750 crore portion reserved for them. The entire issue size is Rs 2,500 crore.

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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.

Following this, the government launched a follow-on public offer earlier last month, raising Rs 6,000 crore in the issue. 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.

The funds raised through both these follow-on offers 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. Indian government has undertaken strategic sale of stake in profitable PSUs to help boost up state revenue and bridge the fiscal deficit, but has repeatedly fallen short of its disinvestment targets in the past. It has a target to earn Rs 56,500 crore by divesting its stake in public sector undertakings in the current financial year 2016-17, and Rs 72,500 crore in the next financial year.

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