At any point in time, a stock on the ETF can have a maximum weightage of 25 per cent

The Government will now have another route to divest its holdings in 10 public sector enterprises with the launch of the CPSE ETF (Central Public Sector Enterprises Exchange Traded Fund) by Goldman Sachs AMC, here on Friday.

On May 2, 2013, as part of the disinvestment programme, the Government had approved the setting up of a CPSE ETF comprising equity shares of CPSEs, to be launched as a CPSE ETF mutual fund scheme.

Goldman Sachs to manage

The Department of Disinvestment appointed Goldman Sachs Asset Management (India) to launch and manage the scheme. Out of the proceeds of the new fund offer, Goldman Sachs would purchase CPSE shares forming part of the CPSE Index. It would be bought in proportion to the composition and weightages on CPSE Index.

The President of India (seller), represented through different Departments and Ministries, will sell the shares at a discounted rate to the scheme and Goldman Sachs will in turn create and allot units of the scheme, to unit-holders. The seller may at his discretion sell additional shares to the scheme.

NSE subsidiary, India Index Products and Services Ltd, has constructed a CPSE ETF index, which will be disseminated by the exchange starting March 18. ETFs will track the performance of the CPSE index. At any point in time, a stock on the ETF can have a maximum weightage of 25 per cent. Weightages will be re-aligned every quarter.

Eligibility

The CPSE Index constituents should have more than 55 per cent Government stake under the promoter category with an average free float market capitalisation of more than ₹1,000 crore for the six months ending June 2013. All the companies should have paid at least 4 per cent dividend, including bonus for the last seven years or for at least seven out of the last nine years immediately preceding the cut-off date, June 28, 2013. .

The ETF will be listed on the NSE and BSE.

(This article was published on March 13, 2014)
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