Markets

Power your portfolio with fourth tranche of CPSE ETF

KR Srivats New Delhi | Updated on November 20, 2018 Published on November 20, 2018

Follow-on-fund offer to open on Nov 28; four new stocks in, three out in revamped index

You can now take an exposure to pure play power sector stocks through the CPSE Exchange Traded Fund (ETF) route. For the first time ever, some top power sector companies have been included in the CPSE ETF basket, which now comprises 11 stocks in all as compared to the earlier 10.

Moreover, the opportunity to invest at a good discount is round the corner with the fourth tranche of CPSE ETF opening on November 28 and closing on November 30. The anchor investors book will open on November 27.

Making a grand entry into the rejigged CPSE ETF basket is NTPC (with weightage of 19.6) along with NLC and SJVN.

NBCC is the fourth stock that has now been included in the CPSE ETF index.

The three stocks that have exited are GAIL, Container Corporation of India and Engineers India as the government holding had come down to the specified level. Henceforth, companies will be removed from the CPSE ETF index if government holding falls to 53 per cent as against earlier specified 55 per cent.

The other PSU stocks that continue to form part of the index are ONGC, Coal India, IOC, Oil India, PFC, Bharat Electronics and REC.

CPSE ETF is an open ended index exchange traded scheme managed by Reliance Nippon Asset Management Company (RNAM)

Sundeep Sikka, ED and CEO, RNAM, said that CPSE offers a compelling opportunity for investors, especially retail and retirement funds, to invest in the India growth story at an attractive valuation, low expense and embedded discounts.

Investors should consider this as an opportunity to benefit from the growth of these PSUs — some of which are Navratnas, Maharatnas, Miniratnas and are either sector leaders or near monopolies in their respective sectors, he said.

The dividend yield of Nifty CPSE Index is close to 5.25 per cent further adding to the overall merit of investing in this ETF. In addition, CPSE ETF has a very low expense ratio of 0.95 bps.

Divestment target

The government will offer an upfront discount of 4.5 per cent in the third CPSE ETF follow-on-fund-offer (fourth tranche) and is looking to mop up ₹14,000 crore as disinvestment through this route.

It may be recalled that the government had in the earlier three tranches raised in aggregate ₹11,500 crore. There was strong response to the earlier three tranches in the sense that total demand from investors stood at whopping ₹28,000 crore (as much as ₹16,500 crore had to be returned).

In the upcoming CPSE ETF FFO, the base size offer is ₹ 8,000 crore with a green shoe option of ₹ 6,000 crore

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Published on November 20, 2018
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