Govt to raise ₹10,000 cr via CPSE ETF

Mumbai | Updated on January 23, 2020

The 6th follow-on offer will have a base issue size of ₹10,000 cr with a green-shoe option

Nippon India Mutual Fund has filed draft prospectus for the sixth further fund offer (FFO) of CPSE ETF to raise ₹10,000 crore.

As part of the disinvestment programme, the issue is likely to open for anchor investors on January 30 and for other institutional and retail investors the next day.

In May 2013, the Cabinet Committee on Economic Affairs approved setting up a central public sector enterprise exchange-traded fund (CPSE ETF) comprising equity shares of central public sector enterprises. This was launched as a CPSE ETF mutual fund scheme.

Nippon Life India Asset Management, formerly Reliance Nippon Life Asset Management, was mandated to manage the CPSE ETF on behalf of the government.

The sixth FFO will have a base issue size of ₹10,000 crore with a greenshoe option to retain a portion of the oversubscription.

Retail investors can invest a minimum of ₹5,000, while non-institutional investors and qualified institutional buyers (other than anchor investors) can invest a minimum of ₹2 lakh.

The minimum investment for anchor investor is fixed at ₹10 crore.

Effective from Friday, the government’s rejigging of the Nifty CPSE index — exclusion of IOCL and PFC and inclusion of Cochin Shipyard, NHPC, NMDC and Power Grid Corporation — comes into effect.

Eligibility criteria

The other constituents of the CPSE ETF include ONGC, NTPC, Coal India, REC, Bharat Electronics, Oil India, NBCC India, NLC India and SJVN. The Centre has also changed the eligibility criteria for the CPSE index constituents. Earlier, stocks where the government held over 51.5 per cent stake were eligible for inclusion. Now, stocks where the government holds more than 51 per cent stake are eligible.

The government has already raised about ₹49,500 crore through CPSE ETF issues. The March 2014 issue, the first one, garnered ₹3,000 crore followed by ₹6,000 crore in January 2017, ₹2,500 crore in March 2017, ₹17,000 crore in November 2018, ₹10,000 crore in March 2019 and ₹11,500 crore in July 2019.

The proceeds from the ETF will help the government, which is reeling under financial stress, meet its disinvestment target of ₹1.05-lakh crore in the current financial year. It had targeted to raise about ₹85,000 crore through disinvestment in the preceding financial year.

Published on January 23, 2020

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