Source says govt revives plan to launch financial sector ETF

Faced with limited headroom to raise funds through further fund offerings of existing equity exchange-traded funds, the disinvestment department has revived a plan to launch an exchangetraded fund comprising stocks of state-owned financial institutions, a senior finance ministry official said.

"There is not much scope left in either of the two ETFs without going below 51% government shareholding in certain public sector companies. Therefore, we may consider bringing the ETF based on state-owned financial institutions back on drawing board," the official told Cogencis.

Currently, the Department of Investment and Public Asset Management has two equity ETFs --Central Public

Sector Enterprises ETF and Bharat 22 ETF.

In the case of Bharat 22 ETF, the government is not willing to divest further stake in Axis Bank and ITC Ltd and there is not much stake left in Larsen & Toubro Ltd, the official said. Without these companies, the ETF will lose its diverse nature and become a central public sector enterprises-dominated one, the official said.

Also, there is little space left to raise funds through the Central Public Sector Enterprises ETF without bringing the government's shareholding in some public sector undertakings below 51%.

According to the Companies Act, the government must have at least 51% stake in a company for it to be recognised as a public sector entity.