Keen to fast-track stake sale in state-owned enterprises, the finance ministry will soon appoint an advisor to design an exchange traded fund of central public sector entities (CPSE ETF) so that the fund could be launched in the next three months. The department of disinvestment is expected to issue a ‘request for proposal’ for hiring the advisor in a few days. ETFs represent a basket of securities traded on an exchange.
A government official said bids would be invited from merchant bankers, consultancy firms and asset management companies having experience of managing ETFs.
Once an advisor is hired, the ministry will appoint an ETF provider, an asset management company, which will manage the fund on behalf of the government. The government is yet to decide how much of the stake in each of the companies identified for divestment should be part of the proposed ETF.
The proposal was originally floated by former finance minister Pranab Mukherjee. The present finance minister P. Chidambaram has now given his ‘in-principle’ approval for setting up the ETF for selling stake in state-owned companies. An ETF comprises a diverse mix of major companies that are present in the listed space.
Sources said DoD will shortlist 10 to 15 ‘fairly liquid’ listed public sector companies with good market cap size as part of the ETF index. The department is planning to model the fund on the lines of the Hong Kong Tracker Fund.
The department is exploring a possibility to carry out part of the stake sale in some of the CPSEs which has got cabinet approval through the proposed ETF route. Thus a part of government stake in SAIL could be divested by listing it on the proposed ETF index while rest of it can be carried out through share auction or other routes. Major public sector undertakings such as NMDC, Indian Oil Corporation, Power Grid Corp, GAIL, SAIL, OIL, BPCL, Power Finance Corp, REC and NALCO are likely to be the proposed ETF’s underlying shares.
