CPSE ETF sees demand of Rs 40,000 crore, oversubscribed 5 times

The disinvestment plan of the Centre is off to a flying start, with the CPSE ETF getting subscribed five times. According to people in the know, the ETF received subscription for more than Rs 40,000 crore as against the base issue size of Rs 8,000 crore, till 5:00pm on Friday. 

The people added that the Centre may exercise its green shoe option of more than Rs 3,000 crore to retain the additional funds that came over and above the base issue size. 

The sixth tranche of the CPSE ETF opened for the anchor book on Thursday. This was subscribed more than eight times, as it received bids for units worth Rs 20,000 crore, as against Rs 2,400 on offer. 

On Friday, the ETF was opened for non-institutional investors and data suggests the non-anchor book also received strong investor interest.

The final amount the government garners from its fifth follow-on fund (FFO) offer of the CPSE ETF depends on the additional funds it retains through the green shoe option. The 3 per cent discount being offered to investors was a major factor that brought in the huge investor inflow, say analysts. 

Further, bankers suggest that the ETF repsonse is positive for the government’s massive disinvestment target. In the Budget, the government set its divestment target at Rs 1.05 trillion for FY20. 

Sundeep Sikka, CEO of Reliance Nippon Life Asset Management, which manages the CPSE ETF, said, “We are proud to have contributed to the government’s disinvestment programme by launching another successful tranche of the CPSE ETF, with record collections in this tranche relative to all our earlier tranches.” 

The previous tranche was subscribed 3.05 times. The fifth tranche received subscription of above  Rs 30,000 crore against an issue size of Rs 10,000 crore, including the green shoe option. 

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

The government is likely to tap the ETF route more aggressively, with the Budget laying down certain tax incentives for investors participating in disinvestment-related ETFs. 

One of the Budget proposals said that such ETFs would get the status of equity-linked savings schemes (ELSS). 

Additionally, the Budget has proposed extending concessional tax rate of short-term capital gains to equity-oriented fund of funds (FoF) set up for disinvestments in state-owned companies or CPSEs.