Power Grid dropped from PSU ETF on Sebi norm

Govt files offer document with Sebi; Targets FY14 launch

The Centre has dropped Power Grid Corporation from the proposed public sector undertaking (PSU) exchange-traded fund (ETF) basket following capital markets regulator Securities and Exchange Board of India (Sebi)’s  refusal to relax a norm, two people said.

Sources added the offer document for the Central Public Sector Enterprises (CPSE) ETF had been filed to Sebi and the government was launching the product before the end of this financial year.

The CPSE ETF will have 10 stocks, instead of the 11 cleared by a panel headed by Finance Minister P Chidambaram in January.

The government aims to raise Rs 3,000 crore from the ETF and to launch a new fund offer in early March.

“Most criteria, discussed in principle with Sebi, have been met and, therefore, the approvals should come soon,” said a source.

Typically, Sebi processes an offer document in less than 30 days.

Last month, the department of disinvestment, overseeing the ETF launch, had written to Sebi to relax a norm that barred a promoter from selling more shares after a public issue.

Power Grid, which potentially could have had a significant weightage in the ETF, had to be dropped as the Centre had sold 11 per cent of its stake in the company through a follow-on public offering in December.

As per the rules, there will be a restriction on the government from further stake sale in the company for a period of one year.

“Sebi has allowed Engineers India to be part of the ETF,” the source added. State-owned Engineers India, too, had launched an FPO earlier this month as a part of the disinvestment process.

The DoD has appointed Goldman Sachs as the fund manager and ICICI Securities as advisor for the CPSE ETF.

This first-of-its-kind ETF is also likely to have certain unique features like ‘loyalty incentive’ and ‘upfront discount, to attract retail investors.