Government today announced setting up of a new Exchange Traded Fund (ETF) to sell its stakes in 22 public firms under the Rs 72,500 crore - disinvestment programme during the current fiscal.
The new ETF --Bharat 22 will comprise shares of 22 highly profitable public sector units, state-owned banks and some holdings in SUUTI and CPSE ETF, Finance Minister Arun Jaitley today.
Among the 22 stocks, IOC, BPCL and NALCO will have 4.4 per cent weight each in Bharat-22. Power Grid will have 7.9 per cent weight, while Axis Bank (7.7 per cent), SBI (8.6 per cent) and Coal India (3.3 per cent) ITC (15.2 per cent), ONGC (5.3 per cent), NTPC (6.7 per cent) will have 3-15 per cent weightage in the ETF.
“It has a diversified portfolio comprising six sectors, including basic materials, energy, finance, FMCG, industrials and utilities,” Jaitley said. The ETF has a sectoral cap of 20 per cent and a stock capping of 15 per cent.
Government has set a stiff target to raise Rs 72,500 crore through disinvestment this year and so far in the last four months Rs 9,300 crore has been realized.
The fund will trade government shares in four state-run energy companies - ONGC Ltd., BPCL, IOC and Coal India. It will also include banking and finance companies such as SBI, Bank of Baroda, Indian Bank, Rural Electrification Corp. Ltd., Power Finance Corp. Ltd. and Axis Bank .
Finance Ministry also plans to sell shares of utilities like Power Grid Corp., NTPC, Gail, NHPC , NLC and SJVN through the ETF. Bharat Electronics , Engineers India and NBCC will also form the Bharat-22 portfolio. The shares shares of ITC Ltd. and National Aluminium Co will also be through the ETF, he said .
ICICI Prudential will manage the fund.
Last fiscal Government had raised Rs 8500 crore through a similar fund as part of its 2016-17 disinvestment exercise.
The ETF will have different tranches, said Neeraj Kumar Gupta, Secretary, Department of Investment and Public Asset Management (DIPAM), adding that the government has not taken any decision on when to launch it.
“The last CPSE index was largely energy centric. This ETF is highly diversified. Different sectors have been pulled into one and value will be discovered in the real time basis. And the large Assets Under Management which the Government is committed to create will provide enough liquidity in the market”, he said.
Jaitley while selecting these sectors, the Government has taken into factor the recent reforms in them so that their valuation is higher.
“We have kept in mind sectoral reforms in each of these sectors which have had a direct positive impact on the valuations of these shares. Some of them are directly impacted by the Government recent decisions”, he said.
Past experiments with CPSE-ETF have proven to be successful, Jaitley said, adding that ETF assets have shown significant increase globally.
“Large investors including sovereign and pension funds have been preferring this mode of investment. This is low cost, less risk, highly liquid assets and is a transparent investment and is traded real time in the market place”, he said.