 "Govt ETF investors strike gold")
Including the five per cent discount, offered by the government for all investors, the CPSE ETF index is trading 13 per cent higher than the allotment price.
A little more than 40,000 investors had subscribed in the Rs 3,000-crore New Fund Offer (NFO), open on March 18-21. Sources said the price at which units would be allocated to NFO investors had been fixed at Rs 17.45. The value of each unit, a hundredth of the CPSE Index’s value, is Rs 19.74, a gain of 13.1 per cent.
The CPSE Index on Tuesday ended at 1,974 on the National Stock Exchange. The index — where Oil and Natural Gas Corporation, GAIL and Coal India are heavyweights — has rallied nearly nine per cent since the issue closed.
Sandip Sabharwal, an independent analyst, said investors with a short-term horizon can consider booking profits on listing. Those who can wait for another year could see further appreciation.
“Public sector unit (PSU) stocks have languished in the past few years and are just beginning to do well. Valuations are still depressed for a lot of PSU stocks. They can do well if there is an improvement in the economy and a more market-friendly regime at the Centre,” he said.
S P Tulsian, an independent stock market analyst, believes the gains on the CPSE Index could be capped in the near future, as there is little room for energy stocks to gain further. Government-owned stocks have ran up faster than benchmark indices this year. While the Sensex has gained 11 per cent from this year’s low, the BSE PSU index has gained around 17 per cent from its 2014 lows.
“The election outcome will have a lot of bearing on the performance of the (CPSE) index. If the Narendra Modi-led Bharatiya Janata Party forms the next government, the index could do well. Otherwise, most energy stocks are ruling near their highs and might not gain much from here,” said Tulsian.
NFO investors have got allotment up to 60 per cent of the application amount. Each investor has got a guaranteed allotment worth 5,000 units. The balance corpus has been allotted on a proportionate basis, said a source.
The NFO was oversubscribed nearly 50 per cent, as it received applications worth Rs 4,400 crore as against its size of Rs 3,000 crore. The fund had garnered about Rs 835 crore from the so-called anchor investors — six insurance companies and State Bank of India. This was the first time the government had used the ETF route for disinvestment.
The year 2013-14 was largely a positive for investors who participated in government divestments. Shares of Engineers India, where the government divested in February, have rallied about 50 per cent from its follow-on offer (FPO) price. Also, Power Grid shares are currently up about 20 per cent since its FPO in December 2013.
Interestingly, the returns of the CPSE Index could have been even higher if Power Grid would have been part of it. The stock was supposed to be but had to be dropped due to some regulatory hurdles.