CPSE ETF may include shares of 11 cos, rebalanced index to be ready by Oct

The new index of the CPSE Exchange Trade Fund (ETF) is likely to have shares of 11 state-owned companies, in place of 10 at present, an official said.

The Finance Ministry, along with investment bankers, is currently in the process of rebalancing the ETF and the new index is likely to be ready by end-October, the official added.

Shares of three CPSEs -- GAIL, Engineers India Ltd (EIL) and Container Corporation -- will be removed from the index since the government holding in these companies has fallen below 55 per cent.

These stocks would be replaced by scrips of four new CPSEs, including KIOCL, which will take their total number in the ETF to 11, the official told PTI.

The government currently owns 99 per cent stake in KIOCL (formerly Kudremukh Iron Ore Company Ltd).

The CPSE ETF, which functions like a mutual fund scheme, comprises scrips of 10 bluechip PSUs -- ONGC, Coal India, IOC, Oil India, PFC, Bharat Electronics, REC, GAIL, EIL and Container Corporation of India.

GAIL India, Container Corp and EIL have weightage of 11.25 per cent, 5.08 per cent and 2.28 per cent, respectively in CPSE ETF.

Since the weightage and scrip value of GAIL, Container Corp and EIL are higher, four new CPSEs have to be included to replace them to keep the CPSE ETF index value at the same level.

"The new index should be ready by end October after which the government will launch the fourth tranche of follow on offer of the ETF," the official added.

CPSE ETF was set up in 2014 and the government has so far sold stake in the 10 companies in the basket in three tranches, thereby raising Rs 115 billion.

Currently, the government holds 53.34 per cent, 54.80 per cent and 52.02 per cent stakes in GAIL, Container Corp and EIL, respectively.

When CPSE ETF was set up, a limit was fixed such that the stake sales could take place till the government holding in the 10 constituent companies reached 55 per cent.

Since the government holding in these three CPSEs have fallen below 55 per cent, new scrips have to be included to replace them.

ICICI Securities has been appointed as adviser for the fourth tranche of the ETF.

Through the three tranches of CPSE ETF, the government has already raised Rs 115 billion -- Rs 30 billion from the first tranche in March 2014; Rs 60 billion in January 2017 and Rs 25 billion from the third in March 2017.

The government has budgeted to raise Rs 800 billion through disinvestment in the current fiscal. It has mopped up over Rs 90 billion so far.