Currently the government holds 52.05 percent in Engineers India, and 7.97 percent stake in ITC through Specified Undertaking of the Unit Trust of India
To meet the divestment target, the government will launch an additional offering of Bharat-22 Exchange Traded Fund (ETF) on February 14 to raise at least Rs 3,500 crore, officials told PTI on Tuesday.
The ETF sale would be for a single day, in which both institutional and retail investors can participate.
The base issue size has been fixed at Rs 3,500 crore with an option to retain any additional subscription. In this additional offering, the government is selling stake in 20 companies out of 22 available in the Bharat-22 ETF basket.
ITC is not a part of this additional offering, said a notice issued by ICICI Prudential AMC, the trustee for this Bharat-22 ETF. The company's weightage in the ETF basket is 16.45%.
Along with ITC, Engineers India could be the other company wherein the government is not selling stake through ETF, CNBC-TV18 reported quoting sources.
"Government of India (Gol) shall disinvest the shares of central public sector enterprises (CPSEs) and public sector banks (PSBs) forming part of S&P BSE Bharat 22 Index (the underlying index) through this Additional Offering to the extent the shareholding of the GoI post disinvestment is maintained at or above 52 percent of the paid-up share capital of those CPSEs and PSBs, and/or subject to any other limits/conditions specified by the GoI," said the notice issued by ICICI Prudential AMC.
"And the government will not disinvest shares of ITC which forms part of the underlying index through this Additional Offering," it added.
The cumulative weightage of 20 companies (out of 22) to be disinvested by the government is 78 percent while the weightage of rest of 2 companies, shares of which will be bought from the open market, is 22 percent.
As the government will maintain at or above 52 percent of the paid-up share capital of those CPSEs and PSBs after this Additional Offering, the AMC has to maintain weightage of each stock in Bharat-22 ETF index. So to maintain that weightage, it will have to buy shares of both companies from open market and give it to investors.
So the buying demand could be one of reasons for upside seen in stocks on February 13, a day ahead of opening of Additional Offering of Bharat-22 ETF, sources said.
Earlier, the government had announced 5 percent discount on the closing price of S&P BSE Bharat 22 Index on February 13. Now as there are only 20 companies on offer, the effective discount to the investor would be approximately 3.9 percent.
"The above is only for illustrative purposes and the actual discount applied may vary depending on various factors," the trustee notice said.
Engineers India has a 0.78 percent weight in Bharat 22, sources told CNBC-TV18.
Currently the government holds 52.05 percent in Engineers India, and 7.97 percent stake in ITC through Specified Undertaking of the Unit Trust of India.
The government has so far raised Rs 22,900 crore through the Bharat-22 ETF. While Rs 14,500 crore was raised in November 2017, another Rs 8,400 crore was raised in June 2018.
The central public sector enterprises (CPSEs) that are part of the ETF include ONGC, IOC, SBI, BPCL, Coal India and Nalco.
Other constituents include Bharat Electronics, Engineers India, NBCC, NTPC, NHPC, SJVNL, GAIL, PGCIL and NLC India. Only three public sector banks — SBI, Indian Bank and Bank of Baroda — figure in the Bharat-22 index.
Also, the government's strategic holding in Axis Bank, ITC and L&T, held through Specified Undertaking of Unit Trust of India (SUUTI), has been put in the ETF basket.
This would be the second ETF offering by the government in the current fiscal which ends in March. In November last year, the government had raised Rs 17,300 crore through a follow-on offer of another exchange traded fund — CPSE ETF, which comprises shares of 11 public sector enterprises. This was the biggest-ever fund raising from an ETF domestically.ITC was quoting at Rs 280.85, up Rs 5.40, or 1.96 percent and Engineers India was up 1.81 percent at Rs 115.60 on the BSE, at 10:16 hours IST.