Govt to raise Rs 5,000 crore from CPSE ETF by March-end

Proceeds to be part of govt's disinvestment receipts for the year

The finance ministry is planning to raise Rs 5,000 crore from the Central Public Sector Enterprises (CPSE) exchange-traded fund (ETF) by the end of 2014-15, Business Standard has learnt. The proceeds will be part of the government’s disinvestment receipts for the year.

Senior officials said while no new names would be added to the ETF, Goldman Sachs Asset Management, which manages the closed-end fund, would issue Rs 5,000 crore worth of additional units to investors. “The Cabinet has already approved raising the additional amount,” an official said. Launched on March 28 and listed on April 4 last year, the CPSE ETF had raised Rs 3,000 crore for the government last year. It had reached a 52-week high of Rs 27.95 a unit on April 9. On Tuesday, the ETF closed at Rs 24.53 a unit. The constituent firms are Coal India, Oil and Natural Gas Corporation (ONGC), GAIL, Rural Electrification Corp, Power Finance Corp, Container Corp, Indian Oil, Oil India, Bharat Electronics and Engineers India.

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 biggest advantage is that it provides diversification to investors and is cheaper than investing in a fund. The brokerage fees are the same as trading in an individual stock. An open-ended ETF has no upper investment limit but a closed one has.

Business Standard had earlier reported the department of disinvestment in the finance ministry was reconsidering its plan to offload a 10 per cent stake in Coal India and a five per cent one in ONGC this financial year, given a drop in these companies’ share prices. The government could, alternatively, look to dilute its holdings in firms like PFC, REC, NHPC, or new names like NDMC, Dredging Corporation and Nalco, to raise about Rs 20,000 crore.

The ministry’s plan for the EPSE ETF, though, is not subject to market conditions. Officials said it would be carried out before the end of March, irrespective of where the markets were heading.