Discounts make ETF attractive; expect strong upside: DIPAM Secy

In an interview to CNBC-TV18 Neeraj Kumar Gupta, Secretary, Department of Investment and Public Asset Management (DIPAM) spoke about his views on Central Public Sector Enterprises Exchange Traded fund (CPSE ETF).Adding to the fact that ETF gave compounded annual growth rate (CAGR) of 14.4 percent since its launch in 2013-14 Kumar said a strong upside is expected for CPSE ETF and there is good opportunity for investors going ahead.He also added an upfront discount of five percent made CPSE ETF much more attractive for retail investors than most of its other competitors.Below is the excerpt of Neeraj Gupta’s interview to CNBC-TV18’s Rituparna Bhuyan.Q: Can you tell us about the CPSE ETF?A: It is an attractive product, it is a tested product now. It gives government an idea to come with an Funds from operations (FFO) purely based on demand. This ETF was launched in 2013-14 with a size of Rs 3000 crore and since then it has given a CAGR of 14.4 percent as compared to Nifty CAGR of 8.9 percent for the same period.If you compare even the dividend, it is 4.07 percent as compared to 1.36 percent of Nifty. The product itself is very attractive for investors and most of the constituents of these products, 10 CPSE’s, they are all bluechips. All of them are doing very well. So, a very strong upside is there. I am sure this is a good product at the right point of time and it will be very attractive for investors especially retail and even the pension funds.Q: Last time you had announced a 15:1 bonus as well as far as the CPSE ETF is concerned which was well appreciated by the investors. This time also anything on those lines?A: When we analysed the retail investors what are they interested in – holding it for one year and then taking a bonus or better upfront discount. We realised that they were in favour of the second one. So, government decided to give a better upfront discount on the allotment to retail and give priority in allotment to retail.  So, they will have better chances of getting this ETF.Q: January 17 this FFO is launching and January 18 and 20 other investors can join in. If you can just tell us, how does this bid price get decided? A: The issue opens on January 17 2017 only for anchor investors who are Rs 10 crore and above and they put in 25 percent of the money upfront. On January 18, 19 and 20 it is open for everybody.The weighted average price of this ETF unit on January 18, 19 and 20 is taken as the price.