(Central Public Sector Enterprises – Exchange-traded fund)
The CPSE ETF basket consists of shares of ten big public sector units (PSUs)
ONGC ● GAIL (INDIA) LTD ● COAL INDIA LTD ● RURAL ELECTRIFICATION CORPORATION LTD ● OIL INDIA LTD ● IOC
POWER FINANCE COPRORATION LTD ● CONCOR ● BHARAT ELECTRONICS LTD ● ENGINEERS INDIA LTD
Offer opens on 18th January & closes on 20th January 2017
Demat a/c is mandatory
CPSE ETF was launched in order to facilitate GOI’s (Government of India) initiative to dis-invest some of its stake in selected CPSEs through the innovative ETF route. The ETF is based on Nifty CPSE index which includes 10 listed Central Public Sector Enterprises. CPSE ETF is a Rajiv Gandhi Equity Savings Scheme (RGESS) Qualified Scheme.
CPSE ETF: Background
- CPSE ETF New Fund Offer (NFO) was first launched in March 2014
- NFO received overwhelming response; NFO collection was Rs.4,363 crs, out of which Rs.1,363 crs was refund to investors due to the issue size limit of Rs.3,000 crs
- Participation across various categories of investors – 37,323 investors invested in CPSE ETF, out of which ~98.5% were Retail Individual Investors
- Units of CPSE ETF were listed on 04th April 2014 on NSE & BSE
Recent Development: Proposal to launch the FFO
- Based on the success of CPSE ETF NFO, DIPAM is conducting further divestment of the underlying CPSEs which are constituents of the CPSE ETF and hence launching the second tranche of CPSE ETF.
- For Anchor Investor FFO opens on Jan 17, 2017 and closes on Jan 17, 2017 and for Non – Anchor Investor FFO opens on Jan 18, 2017 and closes on Jan 20, 2017
- Maximum Amount to be Raised during FFO is Rs. 6,000 Crores [(“Initial Amount” – Rs. 4,500 Crores plus “Additional Amount” – Rs. 1,500 Crores which is in addition to the stated “Initial Amount”)
- Discount of 5 (five) % on the “FFO Reference Market Price” of the underlying shares of Nifty CPSE Index shall be offered to FFO by GOI to all categories of investors
- Play on India growth story through investment in the large CPSE stocks at attractive valuations
- Portfolio diversification through investment in blue-chip Maharatna and Navaratna CPSE stocks which are sector leaders
- FFO price advantage – Upfront discount to all categories of investors
- Attractive Valuation and Dividend Yields: P/E ratio and dividend yields better compared to broader market index
- Flexibility of trading on real time basis
- Lower expense ratios and transaction costs
- Investors will be able to diversify exposure across a number of Public Sector companies through a single instrument
Avail upto 9.25% interest on your investment for a 7-year duration.
Issue opens : 29-August-2016. Apply Early. First come first serve basis.
The issue offers yields ranging from 9.05% to 9.25% depending up on the Category of Investor and the option applied for.
Credit Rating of ‘CARE AAA’ by CARE and “BWR AAA”, Outlook: Stable by Brickworks Ratings India Private Limited
The NCDs are proposed to be listed on the National Stock Exchange of India Limited (“NSE”) and BSE Limited(“BSE”)
Total Issue Size : Rs.10,000 Cr.
QIB : Rs.3,000 Cr.
Corp: Rs.1,000 Cr.
Individuals : 3,000 Cr.
Fixed deposits have always been regarded as a safe financial instrument by people since they ensure security, provide fixed returns and are comparatively risk-free. However, if one looks at the current tax slabs, fixed deposits may not be as profitable considering the amount of tax incurred on them. Hence, it is highly recommended to park your money in debt funds instead which are essentially a mix of corporate bonds, treasury bills, mutual funds, government securities etc.
Here’s why you should give investing in debt funds a serious thought:
1. No worry about capital safety
If you compare credit ratings of fixed deposits and debt funds, you’ll observe that there’s not much difference in the rankings. These are released by independent rating firms which include CRISIL, CARE, ICRA etc. While fixed deposits have a rating of AAA signifying very high capital safety, debt funds have a score of AA implying high degree of money security.
2. Debt funds guarantee superior post-tax returns
Income received from fixed deposits is termed as interest whereas revenue earned from debt funds is called as dividend. Both of them are categorised differently in terms of taxation. For fixed deposits, tax liability is based on the individual’s present tax slab regardless of the duration of the FD.
Debt funds on the other hand attract virtually zero taxation if held for more than 3 years. For the first year, tax liability for both the instruments is the same. But for fixed deposit investors, taxes need to be paid on interest accumulated every year. Therefore, debt funds are more tax-friendly as opposed to FDs. Moreover, individuals who have investment goals for 3 years or more must certainly opt for debt funds and take advantage of the taxation benefit.
3. Debt funds offer higher liquidity and easy withdrawal
Fixed deposits have a set duration and usually offer low liquidity until the deposit period ends. Most debt funds have high liquidity if the minimum holding time has elapsed and conditional on lock-in period as stated. Although some banks let individuals break the FD in part, many of them will ask you to withdraw the entire amount in addition to paying a penalty.
When it comes to debt funds, individuals can enjoy complete liquidity for their investments. Any amount of funds can be withdrawn at any point of time from the total debt fund value. A small sum in the form of exit load might be levied if money is taken out in less than a year.
Based on the investment horizon, Debt funds are categorized as follows:
Ultra Short Term Funds
Short Term Funds
Medium Term Funds
Long Term Funds
& Income Funds