Indian two thousand rupee banknotes are arranged for a photograph in Mumbai, India, on Tuesday. (Photographer: Dhiraj Singh/Bloomberg)

Finance Ministry Eyes Rs 8,000 Crore Through CPSE ETF With Issue Likely By Month-End

The Finance Ministry is eyeing Rs 8,000 crore through the launch of follow-on public offer of Central Public Sector Enterprises exchange-traded fund by the end of this month, an official said.

This would be the fourth tranche of the CPSE ETF, which comprises shares of 10 bluechip companies. In the earlier three tranches, the government had raised Rs 11,500 crore.

The ministry is in the process of rejigging the companies in the ETF and will include four new CPSEs after removing three of the existing companies—GAIL Ltd., Engineers India Ltd. (EIL) and Container Corporation of India.

We are planning the fourth tranche of the CPSE ETF by November-end. The issue will have a green-shoe option for retaining over-subscription. The target is to raise around Rs 8,000 crore.
Finance Ministry Official 

The ministry, acting through the fund manager of the CPSE ETF, is likely to start rebalancing the CPSE ETF by including new scrips soon, the official added. Shares of three CPSEs will be removed from the index since the government holding in these companies has fallen below 55 percent.

These stocks would be replaced by scrips of four new CPSEs, including MOIL and KIOCL, which will take the total number of stocks in the ETF to 11.

Last month, the fund manager to the ETF Reliance Nippon Asset Management Ltd. had filed draft scheme information document with the Securities and Exchange Board of India for the fourth tranche of CPSE ETF. ICICI Securities Ltd. has been appointed as the adviser.

The CPSE ETF, which functions like a mutual fund scheme, comprises scrips of 10 bluechip PSUs Oil & Natural Gas Corporation Ltd., Coal India Ltd., Indian Oil Corporation Ltd., Oil India Ltd., Power Finance Corporation Ltd., Bharat Electronics Ltd., Rural Electrification Corporation Ltd., GAIL, Engineers India Ltd. and Container Corporation of India.

GAIL India, Container Corp and EIL have weightage of 11.25 percent, 5.08 percent and 2.28 percent, respectively, in the CPSE ETF. Since the weightage and scrip value of GAIL, Container Corp and EIL are higher, four new CPSEs have to be included to replace them to keep the CPSE ETF index value at the same level, an official said.

CPSE ETF was set up in 2014 and the government has so far sold stake in the 10 companies in the basket in three tranches, thereby raising Rs 11,500 crore—Rs 3,000 crore from the first tranche in March 2014, Rs 6,000 crore in January 2017 and Rs 2,500 crore from the third in March 2017.

Also read: Cantor Agrees to Sell ETF, Retail Stock-Trading Division to GTS

In June, the government raised about Rs 8,400 crore through follow-on offer of another exchange traded fund -- Bharat 22 ETF, which comprises shares of 22 companies, including banks.

The government has raised over Rs 15,000 crore so far this fiscal through PSU disinvestment, which includes about Rs 5,300 crore from Coal India share sale, Rs 1,700 crore from IPOs of four PSUs -- RITES, IRCON, MIDHANI and Garden Reach Shipbuilders.