Reliance MF files draft offer for further CPSE-ETF issuance

Reliance Mutual Fund has filed draft offer documents with capital markets watchdog Sebi to garner funds for the government through a fresh tranche of the CPSE Exchange Traded Fund.
CPSE ETF, 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.
The fund-raising will help the government inch towards Rs 56,500-crore disinvestment target for the current fiscal.
As per draft documents filed with the Securities and Exchange Board of India (Sebi), Reliance MF has applied for the second FFO (Further Fund offer) of the Central Public Sector Enterprises, Exchange Traded Fund or CPSE ETF.

The government had raised Rs 6,000 crore through the first FFO of the CPSE ETF in January.
The government had launched the CPSE ETF in March 2014 under which retail investors could invest a minimum of Rs 5,000 to buy units.

CPSE ETF was originally managed by Goldman Sachs MF, which was acquired by Reliance MF in October 2015. Finance Ministry, in September, had given its nod for the transfer of management of CPSE ETF to Reliance Mutual Fund.
Apart from the existing CPSE ETF, the government is planning to create a new ETF comprising stocks of PSUs. It has already appointed ICICI Prudential Mutual Fund to manage the second CPSE ETF.

As per the draft prospectus, the government intends to sell further CPSE shares to the CPSE ETG scheme and the fund house has therefore formulated the second FFO, which would be offered to the public for subscription.
As in the earlier FFO, it has proposed that the fund, out of the proceeds of the second FFO, would purchase the CPSE shares as represented in the constituent companies of the Nifty CPSE Index in similar composition and weightages as they appear in the Nifty CPSE Index.
The government will sell the shares at a discounted rate to the scheme for the benefit of the unit holders and the Mutual Fund will in turn create and allot the units.

After closing of the second FFO, the units will be listed on the stock exchanges in the form of an ETF tracking the Nifty CPSE Index.