Millennium Post

Second round of CPSE Exchange Traded Fund by end of March

“The selling of additional lot in CPSE ETF should happen by March,” a government official said, adding that the proceeds would be added to the disinvestment kitty.

The success of the first CPSE ETF, which was floated in March 2014, prompted the Disinvestment Department to tap the route once again. The previous UPA government had in March 2014 raised Rs 3,000 crore by way of CPSE ETF.

Sources indicate that the government is looking at mopping up about Rs 5,000 crore from the ETF this time. It is the first attempt of the government to channelise investor money into PSU stocks through the mutual fund route.

The 10 PSUs which are part of the CPSE ETF basket are Oil & Natural Gas Corp, GAIL India, Coal India, Indian Oil, Oil India, Power Finance Corp, Rural Electrification Corp, Container Corp, Engineers India and Bharat Electronics. An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. The government estimates to collect Rs 43,425 crore through PSU disinvestment in the current fiscal. So far it has collected over Rs 24,200 crore through stake sale in SAIL and Coal India.

Meanwhile, an NSE official said that the government is looking into options for more divestment in state-owned companies through Central Public Sector Enterprises Exchange-traded Fund to meet its target.

“Discussions are on. It is still not yet known whether government will use the same existing Central Public Sector Enterprises (CPSE) index from which government already raised Rs 3,000 crore last fiscal or a new index will be formed with new composition of PSUs stocks,” NSE Business Development Chief Ravi Varanasi said in Kolkata. Details are not finalised yet, but it is likely within March, he said. Exchange-traded Fund (ETF) has an advantage over Offer for Sale route in terms of volatility management. OFS route is also another major route government had targeted to dilute its holding in PSUs.

The existing ETF, a close-ended fund, is managed by Goldman Sachs Asset Management with a size of Rs 3,000 crore. Meanwhile, speaking about products national Stock Exchange was planning, Varanasi said the bourse had sought permission for cross-currency derivatives from both RBI and SEBI and was hopeful of getting it.

“Dollar-Euro is in great demand. We have sought regulatory approvals and hope to get it,” he said. Currently, four foreign currencies derivatives have been traded, but only against Rupee.
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