ETF OF SELECT PUBLIC SECTOR UNITS

Goldman Sachs Asset Management (India) today launched the much-awaited exchange traded fund (ETF) of select public sector units.

CPSE-ETF is an open-ended scheme that will track the central public sector enterprises index.

To be launched by the National Stock Exchange (NSE) on March 18, this index will consist of 10 major public sector enterprises: Coal India, GAIL (India), Oil & Natural Gas Corporation, Indian Oil Corporation, Bharat Electronics, Oil India, Power Finance Corporation, Rural Electrification Corporation, Container Corporation of India and Engineers India.

An ETF is a security that tracks an index but trades like a stock on an exchange. However, the CPSE-ETF will serve as an additional route for the government to monetise its shareholdings in these entities. The process will be such that the Centre will transfer a basket of stocks to the scheme as part of its disinvestment process against which units will be issued to investors in the scheme.

The new fund offer (NFO) will open for subscription on March 18 for anchor investors (investing above Rs 10 crore) and the next day for non-anchor and retail investors.

Retail individual investors can invest a minimum of Rs 5,000 and in multiples of Rs 1 thereafter up to Rs 2 lakh. On the other hand, non-institutional investors/ QIBs can invest a minimum of Rs 2 lakh and in multiples of Rs one thereafter.

“Though ETF is a very popular (investment vehicle) globally, it is at a nascent stage in India. Moreover, equity ETFs are yet to gain traction here. Through the CPSE-ETF, the government is trying to make this product popular,” said Alok Tandon, joint secretary in the disinvestment department told reporters at the launch here today.

The government plans to raise up to Rs 3,000 crore from this scheme in the outgoing fiscal, Tandon added. Describing the scheme’s benefits, he said it provides a sound opportunity for investors to be part of the top 10 PSUs.

In a bid to attract retail investors to subscribe to the NFO, a 5 per cent upfront discount is being offered. “Loyalty units” will also be given to those retail investors holding the units for a period of one year from the NFO allotment date.

Tandon said investor response to the current scheme would determine whether the government came out with another ETF involving state-owned entities.