Centre plans to raise Rs 10,000 cr from CPSE ETF's seventh tranche: Report

The government is planning to raise over Rs 10,000 crore from CPSE ETF's seventh tranche that would be launched by the end of the current month, according to market sources.
The issue is likely to open for anchor investors on January 30 and for other institutional and retail investors, the next day, they added.

Central Public Sector Enterprises ETFruns a concentrated portfolio with a handful of stocks having weights of as high as 20 per cent on the underlying index. The portfolio is concentrated towards the energy and oil sector.
Nippon Life India Asset Management, formerly known as Reliance Nippon Life Asset Management, is managing the CPSE ETF on the government's behalf and has already filed 'scheme information document' for CPSE ETF FFO 6 with markets regulator Sebi.
Sources privy to the development said the offer will have a base issue size of Rs 10,000 crore. Besides, there will be a green-shoe option.
The decision to launch seventh tranche of CPSE Exchange Traded Fund (ETF) has been taken after receiving robust response for earlier stake sale by the government in the product.
Through the earlier six tranches of the CPSE ETF, the government has already raised Rs 49,500 crore -- Rs 3,000 crore from the first tranche in March 2014, Rs 6,000 crore in January 2017, Rs 2,500 crore from the third in March 2017, Rs 17,000 crore in November 2018 and Rs 10,000 crore in March 2019 and Rs 11,500 crore in July 2019.
The CPSE ETF tracks shares of 11 CPSEs -- ONGC, NTPC, Coal India, IOC, REC, PFC, Bharat Electronics, Oil India, NBCC India, NLC India and SJVN.
The proceeds from the ETF will help the government meet its disinvestment target of Rs 1.05 trillion for the current financial year. It had aimed to garner Rs 85,000 crore through disinvestment in the preceding financial year.

Edelweiss launches maiden corporate bond ETF, aims to raise Rs 15,000 cr

The ambitious Bharat Bond ETF, through which the government seeks to mop up Rs 15,000 crore, opened for public subscription on Thursday.
Edelweiss Asset Management Company is managing the issue of Bharat Bond ETF, the first corporate bond exchange-traded fund in the country.

Investors can subscribe to the ETF with a minimum unit size of Rs 1,000 and the issue would close on December 20, the fund house said in a release on Thursday.
"Through the ETF, Edelweiss Mutual Fund proposes to raise an initial amount of Rs 3,000 crore with a green shoe option of Rs 2,000 crore in the 3-year maturity period (2023) and Rs 4,000 crore with a green shoe option of Rs 6,000 crore in the 10-year maturity bucket (2030)," it said.
The ETF would invest only in AAA-rated bonds of public sector companies and would have target maturity structures.
The ETF with a 3-year maturity would follow the Nifty Bharat Bond Index-April 2023 and the one with a 10-year maturity would follow the Nifty Bharat Bond Index-April 2030.
The yield as on December 5, 2019, of Nifty Bharat Bond Index-April 2023 is 6.69 per cent and that of Nifty Bharat Bond Index-April 2030 is 7.58 per cent.
Available with a minimum unit size of Rs 1,000, the investors who hold these ETFs for over 3 years would get the benefit of capital gains with indexation.
The ETF would invest in constituents of the Nifty Bharat Bond Indices, consisting of public sector companies. Bharat Bond Funds of Funds (FOF) is also being launched for investors who do not have demat accounts, the release said.
It is also the lowest-cost mutual fund product in India and the cheapest bond ETF/fund in the world. If a retail investor puts Rs 2 lakh in the Debt ETF, the AMC would charge a management fee of just one rupee, the release said.
The Department of Investment and Public Asset Management (DIPAM) has mandated Edelweiss Asset Management Company to design and manage Bharat Bond ETF.
"With the creation and launch of umbrella ETF, we hope to diversify investor base," Finance Minister Nirmala Sitharaman said on December 4 after the Cabinet gave its in-principle approval for the bond ETF.
Globally, Bond ETFs have grown at a healthy pace in the last decade, primarily due to lower costs compared to traditional bond funds.
Bond ETF assets under management globally is around $1 trillion. Total ETF assets under management across all asset classes stood at around $4 trillion.

Govt raises Rs 4,368 crore through Bharat-22 exchange traded fund

The government has raised Rs 4,368 crore through the fourth tranche of the Bharat-22 exchange traded fund (ETF). The further fund offer-2 (FFO-2) of the Bharat-22 ETF was subscribed 12 times over its base issue size of Rs 2,000 crore, as it received bids for Rs 24,000 crore worth of units.
According to officials at the Department of Investment and Public Asset Management (Dipam), the government has decided to exercise its green-shoe option and retain Rs 4,368 crore of the overall bids received over the two days.

A note issued by ICICI Mutual Fund (MF), which manages the Bharat-22 ETF, said the overall issue size was fixed at Rs 5,742 crore by Dipam. According to people in the know, the remaining funds will be raised through sales in open market, which will be then purchased by Bharat-22 ETF.
Another note by ICICI MF said the government had decided not to divest its stake in ITC, REC, Engineers India, Nalco, and IOCL in the ETF, and Bharat-22 ETF would accordingly purchase shares of these companies from the open market.
The ETF had opened for subscription for anchor investors on Thursday, with the anchor book getting subscribed 27 times. On Friday, the subscription was open to non-anchor investors, where retail investors could also put in their bids.
The Bharat-22 ETF includes public sector companies such as ONGC, IndianOil, BPCL, SBI, Bank of Baroda, REC, and PFC, among others. The government's strategic stake held in private firms such as Larsen & Toubro, Axis Bank, and ITC are part of the Bharat-22 ETF basket.
ALSO READ: Bharat-22 ETF gets Rs 23,500-cr bids, govt to retain extra Rs 4,368 cr
In the past, the government has used the ETF route aggressively to meet disinvestment targets. However, market participants say the government may look at alternatives to avoid the overhang of ETF-selling on some of the PSU stocks.
“Getting strategic investors into some state-owned firms could be another way to realise the valuations of these companies,” said an investment banker.
This is second ETF offering by the government this fiscal year. It is looking to raise funds to the tune of Rs 1.05 trillion, as part of its disinvestment plans.
For investors getting bids accepted, there could be immediate gains. Shares of the underlying state-owned companies in the ETF are being offered to investors at a 3 per cent discounted share price.
Nimesh Shah, managing director and chief executive officer of ICICI MF, said: “We believe investing in this ETF is one of the ways of owning jewels of corporate India that seek to provide growth and stability.”
To facilitate its disinvestment programme, the government is also working on creating enabling provisions that could allow it to bring down its stake below 51 per cent, while still retaining control in the public sector unit, according to people in the know. Further, they say the right PSU candidates for privatisation are being identified by the government.