Govt to raise up to Rs 14k cr through 4th tranche of CPSE ETF; issue to open next week

The government will next week launch the fourth tranche of CPSE Exchange Traded Fund to garner up to Rs 14,000 crore, investment banking sources said. The government has already raised Rs 11,500 crore in the earlier three tranches of the ETF, which functions like a mutual fund scheme. The issue will open early next week and investors would get 3.5-4 per cent discount over the issue price, the sources said. 

The government is aiming to mop up Rs 8,000 crore, with a green-shoe option to retain either Rs 4,000 crore or Rs 6,000 crore from the fourth tranche of CPSE ETF, they added. The number of scrips in the CPSE ETF has been increased to 11 state-owned companies, as against 10 earlier, with the entry of four new firms namely NTPC, SJVN, NLC and NBCC. 

Three existing companies, GAIL, Engineers India Ltd (EIL) and Container Corporation of India, have been removed from the index as the government holding in these companies has fallen below 55 per cent.  Since the weightage and scrip value of these three companies were higher, four new CPSEs had to be included in the ETF to replace them to keep the CPSE ETF index value at the same level.

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The other seven bluechip PSUs in the CPSE ETF are ONGC, Coal India, IOC, Oil India, PFC, REC and Bharat Electronics.  CPSE ETF was set up in 2014 and the government has so far sold stake in the 10 companies in the basket in three tranches, thereby raising Rs 11,500 crore -- Rs 3,000 crore from the first tranche in March 2014, Rs 6,000 crore in January 2017 and Rs 2,500 crore from the third in March 2017. 

In June 2018, the government garnered about Rs 8,400 crore through follow-on offer of another ETF -- Bharat 22 ETF, which comprises shares of 22 companies, including banks.  The government has mopped up over Rs 15,000 crore so far this fiscal through PSU disinvestment, which includes about Rs 5,300 crore from Coal India share sale, Rs 1,700 crore from IPOs of four PSUs -- RITES, IRCON, MIDHANI and Garden Reach Shipbuilders. 

The budgeted target from PSU disinvestment in current fiscal is Rs 80,000 crore.