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Govt to appoint adviser for CPSE-ETF shortly

The shortlisted four investment bankers are Citibank, ICICI Securities, SBI Capital Markets and Yuanta Funds

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Government is likely to soon finalise adviser for setting up an Exchange Traded Fund () comprising stocks of listed Central Public Sector Enterprises (CPSEs), a move to create an additional mechanism to meet the disinvestment target of Rs 30,000 crore for this fiscal.

The shortlisted four investment bankers -- Citibank, ICICI Securities, SBI Capital Markets and Yuanta Funds -- would make presentation before an inter-ministerial group (IMG) on Thursday.

"Financial bids of technically qualified bidders will be opened on October 25," a Finance Ministry official said.

The adviser will be required to advise the government in all aspects of creating and launching of the proposed '- ETF'.

The ETF, which is an investment fund traded on stock exchanges, will have underlying assets and would be benchmarked against an index. The CPSE-ETF will track index of the listed public sector enterprises.

"The proposed CPSE-ETF will serve as an additional mechanism for the government to monetise its shareholdings in those CPSEs that will eventually form part of the ETF basket," the official added.

The usual mode of disinvestment has so far been IPO, FPO and offer for sale through stock exchange, in addition to Institutional Placement programme.

Of the total of 249 CPSEs and their subsidiaries, only 50 are listed.

CPSEs constitute 20.67% and 19.77% of the total market capitalisation of companies listed at BSE and NSE respectively (as on 28 September 2012). The CPSE with the highest market capitalisation is ONGC.

After taking Finance portfolio in August, P Chidambaram had asked officials to expedite the process of disinvestment so that state-owned companies could hit stock markets in time and help government achieve the target of Rs 30,000 crore in 2012-13.

In September, the government approved the minority stake sale in four PSUs -- NALCO, MMTC, Hindustan Copper, NMDC -- which is likely to fetch around Rs 15,000 crore.

In the current financial year, the disinvestment programme is yet to commence.

ETFs were introduced in India in 2001. Currently, there are 33 ETFs having AUM of close to Rs 11,500 crore and held by 6.2 lakh investors. Gold ETFs dominate the ETF market in the country.

Globally, ETFs have been growing at a rapid pace with an annual growth rate of over 34% in the last decade, with Assets Under Management of $1.5 trillion at present.

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