New Delhi, In a move to boost its disinvestment programme, the Centre on Friday announced the creation of the Bharat 22 exchange traded fund (ETF) comprising 22 companies, or investments, from among central public sector undertakings, public sector banks and strategic holdings in the Specified Undertaking of UTI (SUUTI), Union Finance Minister Arun Jaitley announced here.
“A new ETF has been created under the name Bharat 22,” Jaitley told reporters here, adding that this was the most significant announcement so far this year on the government’s stake divestment programme.
“The 22 companies, oblique investments, comprise of central public sector undertakings (CPSEs), public sector banks (PSBs) and some strategic holdings in SUUTI,” he said.
Large investors (sovereign/pension funds) prefer investing in ETFs due to the benefits of ETF being low cost and less risky, being highly liquid assets, transparent investment and that these can be traded at real time market price, the Finance Minister noted.
“Compared to energy heavy CPSE ETF, it is a well diversified portfolio of six sectors, which are basic materials, energy, financial, FMCG (fast moving consumer goods), industrial and utilities. No sector crosses the 20 per cent sectoral capping and there is a stock capping of 15 per cent,” he added.
The Bharat 22 Index will be rebalanced annually. ICICI Prudential Asset Management Company (AMC) will be the ETF Manager and Asia Index Private Limited will be the Index Provider.
An ETF is a traded security that tracks an underlying asset like a group of companies or commodity. The government last month approved the alternative mechanism through the ETF route to divest its stake in CPSEs.
The alternate mechanism will be used to take decisions for divestment through ETF for all listed CPSEs, subject to the government retaining a 51 per cent stake in them.
While the National Aluminium Co (NALCO) is the only firm in the basic materials category in the Bharat 22 ETF, the energy sector includes the giants ONGC, Indian Oil, BPCL and Coal India.
The finance sector companies include the State Bank of India and Axis Bank, where the government holds some stake, while the only firm included in the FMCG sector is ITC.
Jaitley also said that the government had raised Rs 8,500 crore through the CPSE ETF route in the last fiscal.
In the Budget Speech of 2017-18, Finance Minister Arun Jaitley had promised to use ETF as a vehicle for further disinvestment of shares. The Centre has a disinvestment target of Rs 72,500 crore for the current fiscal, of which Rs 46,500 crore is planned to be raised through disinvestment, while Rs 15,000 crore is the target in the case of strategic disinvestment that involves surrender of government’s majority control of the company.
During the current financial year, the government has realised approx Rs 9,300 crore through nine disinvestment transactions so far.
Globally ETF assets have grown significantly. Globally today there are $4 trillion worth Assets Under Management (AUM). These are expected to touch $7 trillion by 2021, Jaitley said.
Department of Investment and Public Asset Management (DIPAM) Secretary Neeraj Kumar Gupta said that the initial public offering (IPO) of Chochin Shipyard on Thursday was oversubscribed 76 times, which shows “there is hunger in the market”.
ETF AUM has grown approximately five times in last three years as it has been a preferred instrument for investment by Provident Funds following flexibility given to them by government for their investments.