After receiving an overwhelming response from investors for its Bharat-22 Exchange Traded Fund (ETF), the Union government is planning to launch an ambitious ETF in overseas markets based on CPSE (Central Public Sector Enterprises) scrip.
The plan has been in the pipeline for quite some time, and the finance ministry has already started consultations with global investors for the launch of the ETF.
According to official sources in the Department of Investment and Public Asset Management (DIPAM), the government arm that looks after disinvestment of public sector companies, the fund is likely to be launched in the current fiscal year itself.
“We are eyeing large overseas pension funds for investments into the overseas ETF. We will soon appoint fund managers for developing the new ETF. Global road shows have seen good investor interest in the ETF route for investments into CPSEs,” the official said.
DIPAM officials will start developing the index for the new ETF, based on feedback from investors about demand of sector-specific stocks.
The Central government has been using ETFs as a tool for disinvestment for the past few years. ETFs function like a mutual fund scheme and have underlying assets of government-owned companies, giving a chance for the investors to participate in the growth story of Indian Public Sector Undertakings.
The government currently has two ETFs: CPSE ETF managed by Reliance Mutual Fund and Bharat-22 managed by ICICI Prudential.
CPSE ETF tracks shares of 11 CPSEs including Oil & Natural Gas Corp, National Thermal Power Corp, Coal India, Indian Oil Corp, Rural Electrification Corp, Power Finance Corp, Bharat Electronics, Oil India, NBCC India, NLC India and SJVN.
Bharat-22 ETF comprises 16 Central public sector enterprises covering six sectors, three public sector banks as well as three private sector companies in which the government holds minority stakes.
The government has already raised Rs 32,900 crore through two tranches and an additional fund offer of Bharat-22 ETF, and Rs 38,000 crore in five tranches of CPSE ETF in the domestic markets.
Out of the Rs 53,500 crore raised via disinvestment in the current financial year so far, Rs 35,300 crore have come through ETFs alone.
In the current fiscal, the government has budgeted to collect Rs 90,000 crore through CPSE disinvestment, against Rs 85,000 crore mopped up in 2018-19.
New ETF to tap overseas pension funds
The Centre is eyeing large overseas pension funds for investments into the overseas Exchange-Traded Fund. It will soon appoint fund managers for developing the new ETF, according to a DIPAM official.