CPSE ETF likely to hit markets next week; expected to offer discount price

Reliance Nippon Life Asset Management (RNam) -- which manages the CPSE ETF for the government -- is expected to hit the market with the sixth (fifth follow-on offer) tranche of the ETF next week. The follow-on fund offer is expected to have a base size offer of Rs 8,000 crore with an additional green shoe option, according to people in the know.

According to sources, the issue can open for subscription on July 18; first for anchor investors, followed by non-anchor book.

The government is expected to use the mutual fund (MF)-route more aggressively as it looks to meet its disinvestment target of Rs 1.05 trillion for 2019-2020.

Since its first offering in March 2014, the CPSE ETF has raised Rs 38,500 crore.

The previous tranche of CPSE ETF was oversubscribed 3.05 times. The fifth tranche (fourth follow-on offer) received a subscription of more than Rs 30,000 crore against an issue size of Rs 10,000 crore, including the green shoe option.

The ETF is expected to offer a discount price to the investors. Historically, the discount has been one of the attractions for institutional investors and high-net worth investors, looking for quick short-term gains.

To attract long-term retail money into these ETFs, the budget proposed giving tax incentive in such ETFs on the lines of equity-linked saving scheme or ELSS. The ELSS-category -- which has a lock-in period of three years -- is also popular among investors as it gives tax deduction on investment of upto Rs 1,50,000.