Buoyed by the good response from investors to the public sector units’ exchange traded fund (PSU ETF) launched in FY14, the government is looking to come out with a similar ETF this fiscal.
The finance ministry has roped in ICICI Securities to prepare a report on the feasibility, size and the basket composition of the ETF, government officials told FE, adding the new fund could include PSUs which were not part of the previous one.
“ICICI Securities is advising the disinvestment department on the matter. As of now, the size and the basket composition has not been decided. ICICI is expected to submit a report soon. Once we take that into consideration, we will prepare a note to send to Cabinet on a second PSU ETF,” a senior finance ministry official said.
As part of its disinvestment programme last fiscal, the government launched a R3,000-crore PSU ETF on March 18. The ETF comprised scrips of 10 state-owned companies — ONGC, Coal India, GAIL, REC, Oil India, Container Corp, Power Finance, Indian Oil, Engineers India and Bharat Electronics. Upon its launch, it proved a hit amongst investors, who oversubscribed in the fund by R1,000 crore.
In fact, the PSU ETF was a much-needed breather for the disinvestment department in FY14 when the budgeted disinvestment target of R54,000 crore was drastically revised down to R19,027 crore for a number of reasons, which showed a glaring lack of planning on part of the Centre.
For FY15, the Centre excepts to garner R58,425 crore from stake sales in PSUs and residual stake-sale in Hindustan Zinc and Balco. Its disinvestment roadmap has 11 PSUs, including Coal India, ONGC, NHPC, SAIL, and Rural Electrification, among others.
Sources said that the new PSU ETF is likely to be used to divest stake in additional companies which are not yet part of the roadmap, but may be added later during the year.
Disinvestment secretary Ravi Mathur told FE in an interview last month that more companies will be divested this fiscal to meet Sebi’s shareholding norm for PSUs, under which the minimum public shareholding in state-owned companies should not be less than 25%.
Officials also added that the new PSU ETF will be listed on the National Stock Exchange, like its predecessor.
The official also said that the disinvestment department may seek approval to sell a 10% stake in Coal India for R23,700 crore in the next Cabinet meeting.