Employees walk past by electronic ticker boards that indicate latest stock figures inside the atrium at the National Stock Exchange. (Photographer: Dhiraj Singh/Bloomberg)

Reliance Nippon AMC Launches Further Fund Offer Of CPSE ETF To Raise Up To Rs 14,000 Crore

Reliance Nippon Life Asset Management Company launched a further fund offer for Central Public Sector Enterprises-open ended exchange traded mutual fund scheme to raise a base amount of Rs 8,000 crore—the highest the government has divested through this route.

The fund offer came after the success of similar CPSE ETFs in the series that were launched in March 2014, January 2017 and March 2017, through which government raised around Rs 11,500 crore. The fourth tranche of the ETFs, based on investors’ response, may raise up to Rs 14,000 crore, Pankaj Gupta, director at the Department of Investment and Public Asset Management, told reporters during the launch in Mumbai.

The latest CPSE ETF scheme, based on the underlying Nifty CPSE Index which gave a dividend yield of 5.25 percent, comprises 11 public-sector companies, including the newly added three public-sector power firms—NTPC Ltd., NLC India Ltd. and SJVN Ltd.,—and construction company, NBCC (India) Ltd.

“It's a far more balanced and a diversified portfolio, compared to the earlier ones,” Sundeep Sikka, executive director and chief executive officer at the company, told BloombergQuint in an interview. The portfolio was re-balanced as government met its divestment target for GAIL (India), Container Corporation and Engineers India, which exited the index, he said.

The issue opens for anchor investors between Nov. 27- Nov. 30 and for non-anchor investors such as retail, non-institutional, and qualified institutional buyers and foreign portfolio investors between Nov. 28 - Nov. 30. The issue, which gives preference to retail investors and retirement funds, is offered at an upfront discount of 4.5 percent— higher than the 2.5 percent discount offered by Bharat 22 ETF scheme. The scheme is designed at a total expense ratio of 0.0095 percent of daily net assets.

“All these (discount and dividend yield) put together, and good future prospects... We believe this offering will leave enough on the table for retail investors,” said Sikka.

The issue forms part of government’s strategic disinvestment programme, through which it looks to sell its stake in 24 state-owned companies to raise Rs 80,000 crore in 2018-19, as opposed to Rs 1 lakh crore it raised in 2017-18 . After the success of equity-linked CPSE ETFs and Bharat 22 ETFs, the government plans to raise about Rs 10,000 crore through fixed income/debt exchange-traded funds, for which the Department of Investment and Public Asset Management has called for expressions of interest by Dec. 17.