CPSE ETF
(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
Investment Rationale:
- 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