People walk past the North Block which houses Ministries of Finance and Home Affairs. (Photograph: Prashanth Vishwanathan/Bloomberg)

Second Tranche of Government Companies ETF Awaiting Mutual Fund Deal Completion

The second tranche of the first Central Public Sector Enterprises’ Exchange Traded Fund will be launched once the transfer of Goldman Sachs’ mutual fund business to Reliance Capital Asset Management is complete, an official in the finance ministry told BloombergQuint.

Since Goldman Sachs – which was managing the CPSE ETF – sold its mutual fund business to Reliance Capital AMC, the ministry wants to wait till the transaction is complete and the latter can market the second tranche, the official added.

The acquisition of Goldman Sachs’ mutual fund business in India by Reliance Capital Asset Management has already received clearance from Securities and Exchange Board of India and Competition Commission of India. The finance ministry has also given in-principle approval to the two fund houses for the transfer of management of the ETF.

In October 2015, Reliance Capital Asset Management had announced the takeover of Goldman Sachs’ mutual fund business in India for around Rs 243 crore.

The CPSE ETF is currently listed as the Goldman Sachs Mutual Fund CPSE ETF on the National Stock Exchange.

The ETF consists of stocks of ten public sector companies, namely Oil and Natural Gas Corporation, Coal India, Indian Oil Corporation, GAIL India, Container Corp of India, Power Finance Corporation, Rural Electrification Corporation, Bharat Electronics, Oil India and Engineers India.

The government is also looking to launch a second CPSE ETF this year, another source in the finance ministry close to the development said. ICICI Prudential Mutual Fund emerged as the lowest bidder in the race to manage the second ETF, through which the government plans to raise Rs 5,000 crore.

The government is now working with ICICI Prudential Mutual Fund to select index constituents, the above-mentioned source added.

The government is considering having 30-40 percent of the constituents of the second ETF from the energy sector, compared to 66.96 percent in the first ETF, the source said. This will ensure that the market capitalization of the ETF is not impacted by distress in any particular sector.