CPSE ETF draws Rs 850 cr bids from anchor investors on 1st day

Anchor investors put in bids worth about Rs 850 crore in the CPSE Exchange Traded Fund (ETF) that was launched today to help the government meet its disinvestment target.
As many as six anchor investors put in bids for Rs 850 crore in the Central Public Sector Enterprises ETF, sources said. The government had reserved Rs 900 crore for anchor investors, or those bidding for more than Rs 10 crore of shares.
The new fund offer of the CPSE ETF, through which the government aims to garner Rs 3,000 crore, opens for retail and other investor categories tomorrow and closes on March 21.

The CPSE ETF basket consist of shares of 10 PSUs and provides an opportunity for investors to become part-owners of Oil & Natural Gas Corp, GAIL India, Coal India, Indian Oil, Oil India, Power Finance Corp, Rural Electrification Corp, Container Corp, Engineers India and Bharat Electronics.
The fund is managed by Goldman Sachs and will be listed on the stock exchanges in the form of an ETF.
The government has raised about Rs 13,119 crore from disinvestment so far in this financial year. A successful subscription of the ETF would help the exchequer get richer by Rs 3,000 crore.

This would help the government meet the revised disinvestment target of Rs 16,027 crore. In the interim budget for 2014-15, the government lowered the PSU stake sale target from Rs 40,000 crore to Rs 16,027 crore.

"Though ETF is a very popular investment vehicle globally, it is at a nascent stage in India. Also, equity ETFs are yet to gain traction here. Through the CPSE-ETF, the government is trying to make this product popular," Joint Secretary in Disinvestment Department Alok Tandon said.
An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
While a 5 per cent upfront discount will be offered to all classes of investors, one loyalty unit will be allotted for every 15 units held by eligible retail individual investors.

The CPSEs under the index have more than 55 per cent government holding under the promoter category and an average free-float market capitalisation of more than Rs 1,000 crore for the six months ended June 2013.
Assets under management of ETFs in India have gone up to Rs 11,807 crore in September 2013 from Rs 1,396 crore in March 2009.