New ETF to monetise govt stake in listed PSUs, other firms

The Finance Ministry is planning to launch a new Exchange Traded Fund (ETF) as an additional mechanism to monetise government's stake in listed PSUs and other companies.
The ETF may include government stake in companies held through SUUTI as well as those in which it still has some holding.
The Department of Investment and Public Asset Management (DIPAM) has set the ball rolling for the second ETF and has invited bids from 'Advisors' to help create and launch the proposed fund.
"The Government proposes to create and launch a new ETF in addition to the existing CPSE ETF, comprising stocks of listed CPSEs and GoI stake in other corporate entities," DIPAM said, while inviting bids from Advisors by July 11.

The government had launched in March 2014 the first ever Central Public Sector Enterprises or CPSE ETF, comprising scrips of 10 PSUs, which had garnered Rs 3,000 crore for the exchequer.
"The proposed new ETF will serve as an additional mechanism for the Government to monetise its shareholdings in listed CPSEs and other corporate entities that will eventually form part of the new ETF basket," DIPAM added.

The government will appoint one advisor for the new CPSE ETF, which will be involved in a three stage process wherein stage-I shall be to help create a new ETF, stage-II shall include to help select an AMC, a Legal Adviser and help launch and manage NFO.

Stage III shall comprise FFO (follow on offer)/Tap and any other subsequent offerings and obligations arising out of NFO (New Fund Offer)/FFO/Tap etc.
DIPAM may subsequently appoint Asset Management Companies (AMCs) to act as the provider of the proposed ETF.
"The entity appointed as Advisor, or its sister concern or an arm thereof, will not be eligible to participate for selection as the AMC or ETF provider, so as to avoid any situation of conflict of interest," it said.
Specified Undertaking of UTI (SUUTI), formed in 2003, is an offshoot of erstwhile UTI. It has investments in several unlisted companies.

Among the listed entities, SUUTI holds 11.72 per cent in Axis Bank, 11.27 per cent in ITC and 8.18 per cent in L&T.
In March 2014, the government sold 9 per cent of its stake in Axis Bank held through SUUTI for over Rs 5,500 crore.
Government has pegged disinvestment target at Rs 56,500 crore for 2015-16. Of this, Rs 36,000 crore is to come from minority stake sale in PSU and Rs 20,500 crore from strategic sale.
The government has kick started the disinvestment programme for the current fiscal with 11.36 per cent stake sale in NHPC, which fetched about Rs 2,700 crore to the exchequer.