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Seven asset management companies have bid for the exchange-traded fund that the government plans to float for disinvesting part of its holdings under the Specified Undertaking of Unit Trust of India.
Reliance Mutual Fund, Birla Sun Life MF, Kotak Mutual Fund, SBI Mutual Fund, ICICI Prudential AMC, UTI Mutual Fund and Sundaram Mutual fund in consortium with Edelweiss Mutual Fund are the fund houses vying to act as the manager for the new exchange-traded fund (ETF), which is expected to hit the market in the last quarter of this financial year.
Sources said the finance ministry officials will have a meeting with all the applicants on November 5, before taking a call on the final selection.
“Every AMC would be given an opportunity make a presentation. The presentation would be an essential part of the selection process,” said a ministry official.
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The government is expected to raised up to Rs 7,000 crore through the Specified Undertaking of Unit Trust of India (Suuti) ETF.
Last financial year, the Centre had raised Rs 3,000 crore through the central public sector enterprise (CPSE) ETF, which was managed by Goldman Sachs AMC.
Meanwhile, ICICI Securities, which acted as the advisor for the CPSE ETF, will once again advise the government for the Suuti ETF.
ICICI Prudential Mutual Fund wasn’t allowed to bid last time as the sister concern ICICI Securities was appointed as an advisor. However, the government allowed the AMC to bid for Suuti ETF.
The government wants to Suuti ETF to be a closed-ended scheme. Typically, most ETFs are open-ended schemes.
“So far no AMC in India has launched a closed-ended ETF. Structuring the Suuti ETF in the close-ended format is a challenge that fund houses are working on,” said the head of an AMC that has bid for the ETF.
Reportedly, government’s intent behind having a closed-ended structure is to ensure that the stake in the Suuti companies is subscribed by retail investors. Secondly, the stake taken by investors in these companies should not come in the open market in a hurry, said a person with knowledge of the development.
The request for proposal floated by the government states the Suuti ETF will have seven PSU stocks as underlying assets, besides those of Axis Bank, ITC and Larsen & Toubro — the three companies in which Suuti holds sizable stake. The government-owned Suuti owns 11.27 per cent stake in ITC, 8.18 per cent in L&T and 11.66 per cent in Axis Bank.
