Govt Of­fers Slice of Blue Chips Via New Ex­change-Traded Fund

‘Bharat-22’ com­prises stocks of mar­quee PSUs as well as par­tial stakes held by govt through SUUTI

The Economic Times - - Front Page - Our Bureau

ONGC, IOC, BPCL and Coal In­dia

Na­tional Alu­minum

SBI, Axis Bank, Bank of Bar­oda, In­dian Bank, PFC and REC but with a de­fined as­set bas­ket like shares of an in­dex

liq­uid than mu­tual funds as they can be traded on stock ex­changes

ETF de­pends on the value of as­sets held by the fund New Delhi: The gov­ern­ment announced a new ex­change-traded fund (ETF), Bharat-22, that’s ex­pected to speed up a dis­in­vest­ment pro­gramme bud­geted to raise a record .₹ 72,500 crore in the fis­cal year to March 2018.

The ETF com­prises 22 scrips in­clud­ing blue chips such as Oil and Nat­u­ral Gas Corp (ONGC), In­dian Oil Corp (IOC) and State Bank of In­dia (SBI) — all state-owned com­pa­nies — along with par­tial stakes in Axis Bank, ITC and Larsen & Toubro that it holds through the Spec­i­fied Un­der­tak­ing of the Unit Trust of In­dia (SUUTI).

In­vestors can pur­chase ETF units, which will be listed on the stock ex­changes. The value of an ETF unit will rise or fall in line with the value of the 22 stocks. ETFs are sim­i­lar to mu­tual funds in a cer­tain man­ner but are more liq­uid as they can be sold quickly on stock ex­changes like shares. The first gov­ern­ment ETF (CPSE ETF) that was launched in March 2014 is up over 22% in the past one year, more than the near-18% rise in NSE’s Nifty in­dex over this pe­riod and com­pa­ra­ble with re­turns of large cap mu­tual funds.

Bharat-22 will have a di­ver­si­fied mix of stocks from six sec­tors — fast-mov­ing con­sumer goods (FMCG), fi­nance, en­ergy, min­er­als, in­dus­tri­als and util­i­ties.

L&T will have the high­est weight of 17.1%, fol­lowed by ITC at 15.2% and SBI at 8.6%.

The gov­ern­ment raised .₹ 8,500 crore through the first ETF in FY17. ICICI Pru­den­tial AMC will be the ETF man­ager for Bharat-22 and Asia In­dex Pvt Ltd — a joint ven­ture be­tween BSE and S&P Global — will be the in­dex provider.

“While se­lect­ing each of th­ese sec­tors, we have also kept in mind sec­toral re­forms in each of the sec­tors which have had di­rect im­pact on the val­u­a­tions of th­ese shares,” fi­nance min­is­ter Arun Jait­ley said on Friday. “We be­lieve that this ETF will be a fairly suc­cess­ful one.” The large num­ber of 22 com­pa­nies in the bas­ket means small tranches of gov­ern­ment hold­ings in state-owned com­pa­nies and pub­lic sec­tor banks will be in­cluded, Jait­ley added. CPSE ETF com­prised 10 state-owned com­pa­nies — ONGC, Coal In­dia, IOC, GAIL (In­dia), Oil In­dia, Power Fi­nance Corp (PFC), Bharat Elec­tron­ics Ltd (BEL), Ru­ral Elec­tri­fi­ca­tion Corp (REC), En­gi­neers In­dia Ltd (EIL) and Container Cor­po­ra­tion of In­dia Ltd.

There is no cap on funds that can be raised through the ETF, said Ni­raj Gupta, sec­re­tary, Depart­ment of In­vest­ment and Pub­lic As­set Man­age­ment (DI­PAM). “It will be dif­fer­ent tranches as per re­quire­ment of the gov­ern­ment,” he said.

The ETF will give the gov­ern­ment an­other tool to mon­e­tise its stakes in state-run com­pa­nies. Jait­ley said gov­ern­ment has tar­geted a “fairly stiff ” .₹ 72,500 crore through dis­in­vest­ment in the current fis­cal, of which about .₹ 9,300 crore has been raised thus far.

SELECTION OF EQ­UI­TIES

Of the 22 com­pa­nies, ONGC, IOC, BPCL and Coal In­dia are from the en­ergy sec­tor. SBI, In­dian Bank, Bank of Bar­oda, Axis Bank, PFC and REC be­long to the fi­nan­cial sec­tor; Nalco to min­er­als; ITC to FMCG; and BEL, EIL and NBCC to in­dus­tri­als. Power Grid, NTPC, Gail In­dia, NHPC, NLC and SJVNL make up the util­i­ties. There is a sec­toral cap of 20% and a stock cap of 15% in the ETF.

Jait­ley said the in­clu­sion of three state-run banks in Bharat-22 was “con­sis­tent” with the gov­ern­ment’s pol­icy.

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