FinMin eyes Rs 80 bn through CPSE ETF, issue likely by November-end

The ministry is in the process of rejigging the companies in the ETF and will include four new CPSEs after removing three existing companies

The Finance Ministry is eyeing about Rs 80 billion through the launch of follow-on public offer of CPSE exchange-traded fund (ETF) by the end of this month, an official said.

This would be the fourth tranche of the CPSE ETF, which comprises shares of 10 bluechip companies. In the earlier three tranches of the ETF, the government had raised Rs 115 billion.

The ministry is in the process of rejigging the companies in the ETF and will include four new CPSEs after removing three of the existing companies -- GAIL, Engineers India Ltd (EIL) and Container Corporation of India.

"We are planning the fourth tranche of the CPSE ETF by November end. The issue will have a green-shoe option for retaining over-subscription. The target is to raise around Rs 8,000 crore," an official told PTI.

The ministry, acting through the fund manager of the CPSE ETF, is likely to start rebalancing the CPSE ETF by including new scrips soon, 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 MOIL and KIOCL, which will take the total number of stocks in the ETF to 11.

Last month, the fund manager to the ETF Reliance Nippon Asset Management had filed draft scheme information document with capital markets watchdog Sebi for the fourth tranche of CPSE ETF. ICICI Securities has been appointed as the adviser.

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 the 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, an official said.

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 -- Rs 30 billion from the first tranche in March 2014, Rs 6,000 crore in January 2017 and Rs 2,500 crore from the third in March 2017.

In June 2018, the government raised about Rs 84 billion through follow-on offer of another exchange-traded fund -- Bharat 22 ETF, which comprises shares of 22 companies, including banks.

The government has raised over Rs 150 billion so far this fiscal through PSU disinvestment, which includes about Rs 53 billion from Coal India share sale, Rs 17 billion from IPOs of four PSUs -- RITES, IRCON, MIDHANI and Garden Reach Shipbuilders.

The budgeted target from PSU disinvestment in current fiscal is Rs 800 billion.