Govt to raise Rs 5,000 cr by selling PSU shares via ETF

The government plans to raise Rs 5,000 crore by selling shares of public sector companies through an Exchange Traded Fund (ETF) in FY16 as it intends to ramp up disinvestment receipts to an all-time high figure to bridge the fiscal gap, disinvestment secretary Aradhana Johri said on Wednesday.

The government used an ETF, which invested in a pool of 10 public sector stocks, to raise about Rs 3,000 crore in FY14. The ETF is managed by Goldman Sachs. The next tranche of stocks will also be sold to the same ETF, Johri said.

“We are trying to work with Goldman Sachs to make that product more retail friendly this time,” Johri told FE in an interview.

Because of the plan to revise the ETF to give it retail focus, the government did not use the option to divest shares in public sector companies in FY15.

“We will have to take approval from the Securities and Exchange Board of India (Sebi) for this,” she said.

The government plans to raise Rs 69,500 crore in FY16 by mostly selling stakes in public sector companies. Part of that will come through selling shares directly to an ETF, to help the country meet its revenue targets.

The government has built up a robust pipeline of PSU stocks for minority stake sales to meet the FY16 target, which includes Rs 28,500 crore from “strategic sale”, which is 56% more than the FY15 revised estimate under this head.

“Our strategy is that we will not wait for the last quarter,” Johri said, adding that the government will continue selling stocks throughout the year.

The government could not meet disinvestment revenue targets in the past five years mainly due to delaying share sales to the last quarter of the year.

To prevent hammering of stocks in the days ahead of share selling, the department of disinvestment has written to market regulator sebi to halt in trading of the particular stock on the day of the share sale, Johri said.

It has also been suggested to put a cap on fluctuations in share price on the previous day of the share sale.

Disinvestment plans
* The government plans to raise Rs 69,500 crore in FY16 by mostly selling stakes in public sector companies. Part of that will come through selling shares directly to an ETF, to help the country meet its revenue targets
* The government used an ETF, which invested in a pool of 10 public sector stocks, to raise about Rs 3,000 crore in FY14. The ETF is managed by Goldman Sachs
* The government could not meet disinvestment revenue targets in the past five years mainly due to delaying share sales to the last quarter of the year

By Prasanta Sahu