Govt to decide on CPSE ETF follow on offer this month

The government will take a decision this month on a follow on offer for its CPSE ETF, managed by Reliance Mutual Fund, which will fetch about Rs 5,000 crore to the exchequer.
A high level meeting will take place on January 9 to discuss the issue, sources said.
CPSE Exchange Traded Fund, which functions like a mutual fund scheme, comprises scrips of 10 PSUs -- ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India.
According to sources, the government is expected to raise about Rs 5,000 crore through the second tranche of CPSE ETF.

The fund-raising will help the government inch towards Rs 56,500-crore disinvestment target for the current fiscal.
"CPSE ETF has shown outperformance in last one year, based on the strong fundamentals of underlying stocks. We are confident that any follow on offer, being contemplated by the government, would give a good support to retail investors and pension funds to invest and benefit from this asset class," Reliance Mutual Fund Chief Executive Sundeep Sikka said.

In November, Reliance Mutual Fund had filed draft offer documents with capital markets watchdog Sebi for the follow on offer of CPSE ETF.
According to a report by ICRA, CPSE ETF has outperformed the Nifty 50 in the last one year. The fund has given a return of 19.5 per cent, while Nifty 50 has surged by 5 per cent.

Since inception, the fund has given annualised returns of 15.15 per cent (non-retail category) as compared with 12.09 per cent generated by Nifty 50. In the same period, the retail investors received 17.96 per cent after adjusting for loyalty units, said ICRA.
"Government is focusing on making PSUs financially healthy and efficient. Oil sector has been practically liberalised and other sectors such as fertilisers, energy and power are also on the verge of sustained liberalisation," the report said.
The government had launched its first CPSE ETF in March 2014, taking the ETF route to disinvestment for the first time It had raised Rs 3,000 crore through the ETF then.

CPSE ETF, which was originally managed by Goldman Sachs MF, was acquired by Reliance MF in October 2015. The Finance Ministry in September had given its nod for the transfer of management of CPSE ETF to Reliance Mutual Fund.
"The outperformance of CPSE ETF versus Nifty or sector fund in the last one year period will act as a significant pull factor for subscribing to the follow on offer proposed by the government in January. We see it as a huge positive," an analyst said.
Apart from the existing CPSE ETF, the government is planning to create a new ETF comprising stocks of PSUs in the current fiscal with an estimated corpus of Rs 6,000 crore. It has already appointed ICICI Prudential Mutual Fund to manage the second CPSE ETF.