Mumbai: As a part of its divestment programme, the government on Wednesday announced the launch of its second tranche of exchange-traded funds (ETF) based on top 10 listed state-run firms with an aim to raise up to Rs6,000 crore through divestment of government stakes in these firms.
Reliance Nippon Life Asset Management Ltd, which is the appointed fund manager for the CPSE ETF, said in a press conference in Mumbai that the further fund offer for the ETF will aim to raise at least Rs4,500 crore as a base issue size and will have a green-shoe option of another Rs1,500 crore. Under the scheme, all investors in the ETF will get a 5% upfront discount.
The underlying portfolio of the CPSE ETF will have companies including ONGC Ltd, Coal India Ltd, Indian Oil Corp. Ltd, Gail (India) Ltd, Power Finance Corp. Ltd, Rural Electrification Corp. Ltd, Container Corp.of India Ltd, Bharat Electronics Ltd, Oil India Ltd and Engineers India Ltd.
The department of public asset management (Dipam), ministry of finance, had raised around Rs3,000 crore in the first tranche of the CPSE ETF in March 2014. Since inception, the CPSE ETF has grown at a compounded annual growth rate (CAGR) of 14.42% and accumulated a value of Rs14,507 crore. The units of the ETF are listed on NSE and BSE.
The latest CPSE ETF will allow investments at an expense of 6.5 basis points, which is lower than other mutual fund schemes.
ETFs are the fastest growing asset class in the world. As compared to other mutual fund schemes, ETFs carry lower expense ratios due to lower portfolio management, trading and operational expenses.
Till November 2016, the total size of ETFs stood at $3.3 trillion in the world. In India, there were 63 ETFs with total assets under management (AUM) of around Rs31,118 crore.
As of December 2016, Reliance Nippon Life Asset Management had total AUM of Rs3.38 trillion, with mutual fund assets worth Rs1.98 trillion.
The further fund offer for the latest CPSE ETF will be open for subscription from 17 to 20 January 2017.
ICICI Securities Ltd, has been appointed as the advisor for the further fund offer.