CPSE ETF’s Seventh Tranche Opens To Investors On Jan. 30
The government plans to raise nearly Rs 10,000 crore in the tranche, which will open to anchor investors on Thursday.
The seventh tranche of the Central Public Sector Enterprises exchange traded fund—through which the government would sell shares in 12 state-run enterprises—opens on Thursday.
The government plans to raise nearly Rs 10,000 crore in the tranche, which will open to anchor investors tomorrow and non-anchor investors the day after, the fund’s manager Nippon India Asset Management Co. said in a statement. Investors would get a discount of nearly 3 percent on the issue price.
The tranche would be listed on India’s primary exchanges by Feb. 13 and have a greenshoe option—through which it can retain any oversubscription—based on the response received, according to the statement.
The CPSE ETF is an open-ended index scheme that’s listed as an exchange traded fund and mirrors the Nifty CPSE Index. The Index Maintenance Sub-Committee of NSE Indices Ltd. recently announced that companies having government stake of over 51 percent are eligible for inclusion in the index, from 51.5 percent previously. That raised the number of its constituents from 10 to 12.
Three companies comprise nearly 60 percent of the ETF—Power Grid Corporation Ltd., Oil and Natural Gas Corporation and NTPC Ltd.
Response To Previous Tranches
All previous offerings of the ETF have been oversubscribed by investors, with the highest in July 2019.
Financial Advisors Sound Caution
Only investors interested in the specific CPSE stocks could look to buy this ETF offering but, overall, a diversified fund or a mainstream index like the Nifty would be better, according to Amol Joshi, founder of Plan Rupee Investment Services. He said that’s because ETF is based on the theme of the government looking to dilute stake in these companies.
Vishal Doshi, partner at Alpha Investment Services, said that some of the sectors that the CPSE ETF companies operate in aren’t doing well and that the 3 percent discount can be easily eroded by brokerage costs, taxation and mistiming. Only the brave-hearted investors with 5-7-year view should invest, he said. He, however, said that there could be no possibility of a management fraud in such companies as they’re owned by the government.