Fresh CPSE ETF opens on March 19, to raise Rs 5000 crore

The Department of Investment and Public Asset Management (DIPAM) is slated to launch a fresh tranche of CPSE ETF on March 19, aiming to raise Rs 4,500-Rs 5,000 crore to inch closer towards the sell-off target of Rs 80,000 crore.

The Exchange Traded Fund (ETF) sale through follow-on fund offer (FFO) will have an option of retaining up to Rs 5,000 crore via greenshoe option, sources said on Tuesday, adding that the fresh tranche of ETF has a base size of Rs 3,500 crore and there is an option to retain additional subscription, they added.

Under the greenshoe clause, the underwriters get to buy an additional 15 per cent of the company`s shares at the offering price during an IPO. During the last offering in November, the government had mopped up Rs 17,000 crore -- the biggest disinvestment transaction through the Central Public Sector Enterprises (CPSE) ETF.  The CPSE ETF was set up in 2014 and the government has so far sold stake in 10 companies in the basket in four tranches raising Rs 28,500 crore.

The DIPAM still hopes to not just reach the target but also sees it being exceeded in FY19. The Rural Electrification Corporation-Power Finance Company (REC-PFC) transaction is yet to be completed, which may yield around Rs 15,000 crore if it happens in this fiscal, and together with CPSE ETF, it may help Government exceed Rs 80,000-crore divestment aim for FY19, said the sources.

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The latest tranche of ETF is a last-minute effort by the government to manage some funds, said an official. The government`s disinvestment proceeds have touched Rs 56,473 crore so far in the current fiscal as against the full year budget target of Rs 80,000 crore, still leaving a gap of Rs 23,527 crore.

Last month, Rs 10,000 crore came in from Bharat-22 ETF, and another Rs 5,379 crore from the sale of Specified Undertaking of Unit Trust of India (SUUTI). In February, the government raised Rs 10,000 crore through the additional offering of Bharat-22 ETF. It has sold 3 per cent stake in Axis Bank held through SUUTI through an offer for sale (OFS) and raised about Rs 5,300 crore. For the next financial year, the divestment target has been set at Rs 90,000 crore.

In November, the Finance Ministry rejigged the CPSE ETF and included in the basket the scrips of four state-owned companies -- NTPC, SJVN, NLC and NBCC, making it more attractive to investors.