To give a retail thrust to disinvestment in state-run firms through the exchange traded fund (ETF), the government plans to pay commission to brokers to scale up small investors’ participation as it readies to mobilise Rs 5,000 crore via the route in 2015-16.
The Centre used an ETF, which invested in a pool of 10 public sector stocks, to raise Rs 3,000 crore in March 2014. The ETF units have appreciated 40% to Rs 24.43/unit as of April 1, 2015, from the allotment price of Rs 17.45 on March 28, 2014, a spectacular performance within a year. The Sensex rose 26.5% in the period.
The CPSE ETF is managed by Goldman Sachs Asset Management (India). The next tranche of CPSE ETF will invest in the same basket of ten PSU stocks to help government raise about R5,000 crore, which is a part of its ambitious disinvestment revenue target of R69,500 crore in the current fiscal.
With a mere 8.6% retail participation in the central public sector enterprises (CPSE) ETF last year, small investors largely missed out the opportunity to benefit from its sharp appreciation.
This time, the government wants to popularise the product in advance among retail investors by outreaching them through big brokers with a large client base.
“Some commission will be given to the brokers if market regulator permits,” a source said.
The commission to brokers won’t result in any additional cost to investors as Goldman Sachs would manage it within the management fee of 0.49%.
The government might offer some discount to retail investors also. A 5% discount was given in the new fund offer of the ETF last year.