Divestment plan: Govt appoints Goldman to set up PSU ETF

Global investment banker Goldman Sachs is believed to have been chosen for setting up the PSU Exchange Traded Fund (ETF) to help government achieve its disinvestment target.

The government had earlier shortlisted Goldman Sachs Asset Management and UTI Mutual Fund to act as asset management company (AMC) for the proposed ETF of the public sector enterprises. “Goldman Sachs has been selected as fund manager for ETF,” sources said.

According to sources, the Cabinet is likely to soon consider the proposal of the Disinvestment Department to set up an ETF for the PSUs. The government is planning is raise Rs 40,000 crore by way of PSU stake sale in the current fiscal and has lined up a host of companies, including Indian Oil, Engineers India and Coal India for divesting minority stake.  The ETF, which is expected to reduce volatility in shares of state-owned companies, would comprise 2-3 per cent of shares of listed public sector undertakings (PSUs).

The Empowered Group of Ministers (EGoM) on disinvestment would decide on the structure of the ETF and also the methodology for inclusion and exclusion of scrips from the fund, sources said. The returns of PSU ETF would be benchmarked against CPSE Index Fund. The Fund will be listed on the stock exchanges and will have shares of all PSUs except banks, they added. The DoD has already appointed legal advisers for the PSU ETF.

The proposed ETF comprising shares of listed CPSEs would serve as an additional mechanism for the government to monetise its shareholdings in those companies. In the last fiscal (2012-13), the government has raised Rs 23,920 crore through disinvestment.

The PSU ETF would comprise shares of various profitable state-owned companies. The composition of ETF and weightage of the shares of individual PSU in the index would be decided by the EGoM. ETFs were introduced in India in 2001. Currently, there are 33 ETFs having assets under management of close to Rs 11,500 crore and held by 6.2 lakh investors. Gold ETFs dominate ETF market in India.