Govt raises Rs 4,368 crore through Bharat-22 exchange traded fund

Fourth tranche gets 12x subscription, receiving bids for Rs 24,000 crore of units

The government has raised Rs 4,368 crore through the fourth tranche of the Bharat-22 exchange traded fund (ETF). The further fund offer-2 (FFO-2) of the Bharat-22 ETF was subscribed 12 times over its base issue size of Rs 2,000 crore, as it received bids for Rs 24,000 crore worth of units.

According to officials at the Department of Investment and Public Asset Management (Dipam), the government has decided to exercise its green-shoe option and retain Rs 4,368 crore of the overall bids received over the two days.

A note issued by ICICI Mutual Fund (MF), which manages the Bharat-22 ETF, said the overall issue size was fixed at Rs 5,742 crore by Dipam. According to people in the know, the remaining funds will be raised through sales in open market, which will be then purchased by Bharat-22 ETF.

Another note by ICICI MF said the government had decided not to divest its stake in ITC, REC, Engineers India, Nalco, and IOCL in the ETF, and Bharat-22 ETF would accordingly purchase shares of these companies from the open market.

The ETF had opened for subscription for anchor investors on Thursday, with the anchor book getting subscribed 27 times. On Friday, the subscription was open to non-anchor investors, where retail investors could also put in their bids.

The Bharat-22 ETF includes public sector companies such as ONGC, IndianOil, BPCL, SBI, Bank of Baroda, REC, and PFC, among others. The government's strategic stake held in private firms such as Larsen & Toubro, Axis Bank, and ITC are part of the Bharat-22 ETF basket.

In the past, the government has used the ETF route aggressively to meet disinvestment targets. However, market participants say the government may look at alternatives to avoid the overhang of ETF-selling on some of the PSU stocks.  

“Getting strategic investors into some state-owned firms could be another way to realise the valuations of these companies,” said an investment banker.

This is second ETF offering by the government this fiscal year. It is looking to raise funds to the tune of Rs 1.05 trillion, as part of its disinvestment plans.

For investors getting bids accepted, there could be immediate gains. Shares of the underlying state-owned companies in the ETF are being offered to investors at a 3 per cent discounted share price.

Nimesh Shah, managing director and chief executive officer of ICICI MF, said: “We believe investing in this ETF is one of the ways of owning jewels of corporate India that seek to provide growth and stability.”

To facilitate its disinvestment programme, the government is also working on creating enabling provisions that could allow it to bring down its stake below 51 per cent, while still retaining control in the public sector unit, according to people in the know. Further, they say the right PSU candidates for privatisation are being identified by the government.