The Government is eyeing mopping up additional disinvestment proceeds through the ETF route and could also come out with a new ETF scheme in the coming months albeit with a prior sanction from the EGoM and the Cabinet.
In the Interim Budget 2014-15 presented on February 17, Finance Minister P Chidambaram has put forth an estimated Rs36,925 crore from PSU disinvestments. This fiscal’s target was, however, revised downwards to Rs16,027 crore target from the earlier Rs40,000 crore.
“Practically, there is as such no upper limit for the ETF route which is currently at 3 per cent of the total equity, however we could go for a quarterly review and raise it upwards with Government sanctions,” Alok Tandon, Joint Secretary, Department of Divestment, Ministry of Finance told The Pioneer.
Expressing optimism on the subscription of the present ETF offer, Tandon said this will enable the Government to meet this fiscal’s disinvestment target. He, however, also said that any asset management company would be free to pick up shares from other routes like the market also if it wishes, apart from the ETF.
The Government on Tuesday went to the market to mop up Rs3000 crore through the ETF NFO comprising of ten key maha and mini-ratna CPSEs mostly from the energy sector. The ten CPSEs are ONGC, GAIl, CIl, RERC, CCI, BEl and EIl, The NFO is being managed by Goldman Sachs Asset Management India ltd.
“Globally ETFs have become highly preferred and investors are bullish over ETFs,” said Sanjiv Shah, CEO an Managing Director of Goldman Sachs Asset Management India Pvt ltd. “However, in India ETFs are still highly underutilized and have to gain traction,” he added.
The success of the current ETF NFO is expected to put the final lid on the Rs16,027 crore target for disinvestment of the Government this fiscal year. The Government has already mmobilised Rs13,000 crore uptil now with the earlier disinvestment of stakes in Oil India ltd and BHEl.
The ETF NFO has been opend for subscription by anchor investors (investing above Rs10 crore) and will open from Wednesday for non-anchor and retail investors. The offer for non-anchor investors closes on March 21.An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
While a 5 per cent upfront discount would be offered to all classes of investors, one loyalty unit will be allotted for every 15 units held by eligible retail individual investors who hold the units atleast for a year. The scheme is managed by Goldman Sachs India MF and will be listed on exchanges in the form of an ETF.
The CPSEs under the index have more than 55 per cent government holding under the promoter category and an average free-float market capitalisation of more than Rs1,000 crore for the six months ended June 2013.
Assets under management of ETFs in India have gone up to Rs11,807 crore in September 2013 from Rs1,396 crore in March 2009.