The Union Finance Ministry expects to mop up at least Rs 5,000 crore through launch of first exchange traded fund (ETF) for the listed CPSEs sometime in January.

Rajib Kumar Sen, Director of the Department of Disinvestment (DoD), Ministry of Finance, told Business Line that the earlier planned November time frame (around Diwali) had been extended to January.

He said the AMC, managed and marketed by Goldman Sachs and advised by ICICI Securities, is currently constructing the initial basket of 10-15 and apportioning the weights. “These suggestions would be examined by the Empowered Group of Ministers, headed by the Finance Minister, to take the final call.”

Exclusivity pact

The Government has signed a 3-year exclusivity agreement with Goldman Sachs for the ETF, which restricts both in handling and issuing identical products. The Government has decided a maximum of 3 per cent of the paid-up equity of a CPSE would be divested and allotted to the ETF, which in turn would offer tradable unit on the basket of the underlying assets.

The Government has also decided the ETF would allow “discounts” on the unit’s value at the launch and would make provisions for “loyalty bonus” to the unit holders.

“Since there are deviations from the usual fund products in this ETF’s form and substance, SEBI would require the product differently from the mutual funds. The DoD’s interactions with the market regulator on these issues have already taken place,” Sen said.

Though the proposed ETF would be fed by the primary offers by the Government and would be open for all sections of investors — retail and institutional (both domestic and foreign) — it would lend special emphasis on the small investors. “They may get higher discounts than the institutional investors,” Sen explained.

SEBI’s assurance

He indicated the ETF offer document, may be placed before the SEBI in November, would detail the deviations. The market regulator has promised to set a precedence and tweak the relevant regulations for such products.

“Depending on the demand for such an ETF, the Government may use it as an alternative to other divestment route such as IPO, FPO and OFS,” the DoD Director said.

The official said disinvestment of IOCL was close by. On the pipeline are NHPC and PGCIL. He indicated like last fiscal, the disinvestments would be backloaded and may complete the target.

He, however, indicated that the 5-per cent follow-on offer of SAIL and shelved IPO of RINL may not happen immediately as the steel market continued to be in downtrend and may not resurrect fast to fetch markedly improved valuations.