The Cabinet on Thursday approved the setting up of a central public sector enterprises (CPSE) exchange-traded fund (ETF), which is expected to speed up the disinvestment programme, check volatility in share price movement and encourage retail participation.
"(The ETF) comprises CPSE stocks (from among the listed CPSE stocks). Each stock would have a fixed weightage in the basket," a statement said. The proposal was cleared by the Cabinet Committee on Economic Affairs (CCEA), headed by the Prime Minister.
The composition of the basket, the launch of the New Fund Offer (NFO), the discount to be provided and other issues relating to contribution and pricing of the ETF would be decided by an empowered group of ministers (EGoM), it added. "This will help in minimising market disruptions seen in public offerings of listed CPSEs; increase ability of the government to monetise partial stakes in listed CPSEs, some of which have low liquidity and free float; broadbase retail participation of shares of CPSEs," it said.
The ETF is also expected to deepen the equity market and will be beneficial to the government from a pricing perspective.
The move, the statement said, "will help fulfil the domestic investors' appetite for an equity ETF products as the domestic Indian investor is vastly under-served vis-a-vis the foreign investor community."
The Department of Disinvestment in the finance ministry has already appointed global investment banker Goldman Sachs for setting up and managing the PSU ETF.
The government is planning is raise Rs 40,000 crore through disinvestment in the current financial year and has lined up a host of companies, including Indian Oil, Engineers India, Coal India and Hindustan Aeronautics, for divesting minority stake.
