ETF may Include PSB Shares, Govt Holding in Private Firms
Govt could divest its stakes in Hindustan Zinc, IDBI Bank via the new exchange-traded fund
New Delhi: The government may consider offering shares of public sector banks (PSBs) and its holding in private firms in the new exchange traded fund proposed in the budget for 2017-18, said a senior government official. “There’s no reason why the new ETF can’t have banking stocks in its portfolio,” the official said on condition of anonymity.
The government may divest its holding in Hindustan Zinc through this route since plans to sell its stake strategically have been stuck for a long time, the official said. Staterun IDBI Bank, in which the government has been unable to divest its holding strategically, could also be part of the new ETF structure.
Another government official said ETF could help the government get around state-run banks that have been reluctant to tap into the stock market despite requisite clearances. “The money raised through such stake sale can be ploughed back for capitalisation purposes, if so needed,” the official said. The government garnered about ₹ 6,000 crore from the last ETF, which mostly comprised of infrastructure stocks.
Finance minister Arun Jaitley in his budget speech said that a new ETF with diversified stocks of central public sector enterprises and other government holdings will be launched in 2017-18. “Our ETF, comprising shares of ten CPSEs, has received overwhelming response in the recent further fund offering . We will continue to use ETF as a vehicle for further disinvestment of shares,” Jaitley said.
Last week, economic affairs secretary Shaktikanta Das told ET that the government is examining various options to value IDBI Bank’s large property holdings. The government currently holds 73.98% stake in IDBI and 29.59% stake in Hindustan Zinc.
For 2017-18, the government has set a mammoth disinvestment target of ₹ 72,500 crore, of which ₹ 46,500 crore is to come from regular stake sales including ETFs.
The government has allocated only ₹ 10,000 crore for bank capitalisation in the next fiscal as part of its seven-pronged Indra Dhanush revamp plan for state-run banks. As per the government’s estimates banks will raise about ₹ 1.1 lakh crore from the markets till 2018-19.
“Most banks have raised only a little amount through additional tier I bonds to maintain the regulatory capital,” the second official cited earlier said.