MUMBAI: CPSE ETF (Central Public Sector Enterprises-Exchange Traded Fund), managed by Reliance Mutual Fund, would open its third Further Fund Offer (FFO3) to raise up to Rs 8000 crore as part of the Central government’s disinvestment programme. The FFO3, slated to open on November 27, would be the largest disinvestment mop up of this fiscal so far. Since the issue has approvals to retain oversubscription of up to Rs 6,000 crore, the offer can raise up to Rs 14,000 crore, said Pankaj Gupta, director, Ministry of Finance. This is the largest issue size the CPSE ETF is targeting.
The FFO2, which saw four times oversubscription in March 2017, refunded Rs 7,583 crore as the issue size was restricted to Rs 2,500 crore. The FFO3 would offer to all investors a discount of 4.5 per cent based on the volume weighted aggregate price of the underlying shares as on the bidding days from November 28-30. Bidding is open for anchor investors, who have a 30 per cent reservation on November 27. In the 70 per cent non-anchor category, retail and retirement funds would get preference. said Sundeep Sikka, CEO, Reliance Nippon Life Asset Management.
The composition of PSU stocks in the ETF basket has been changed with the exit of Concor, Engineers India and GAIL, and the addition of NTPC, NBCC, NLC India and SJVN. This makes the ETF with 11 underlying stocks energy-heavy with three oil firms IOC, ONGC, OIL and Coal India, and power generation firms NTPC, NLC and SJVN. The three stocks were removed as they had hit the government ceiling in terms of disinvestment, said Vishal Jain, Reliance Nippon Asset Management.
“We had to ensure diversification in the index and ensure the weightages are similar (stocks that were removed and the ones added). We also ensured two new sectors construction and power come into the index. The companies aligned to the government’s transformation agenda,” Jain said.
The government is also planning a Debt ETF, the details of which are likely to be known before the end of the year, Gupta said. Recently, the disinvestment department had floated a request for proposal to select the AMC that would manage the ETF after having chosen a transactional and a legal advisor to the Debt ETF.