The government will raise Rs 8,000 crore through Reliance Nippon CPSE ETF with a greenshoe option to retain Rs 4,000 to Rs 6,000 crore
Reliance Nippon Life Asset Management will launch the follow-on offer of Reliance Nippon Central Public Sector Enterprises (CPSE) Exchange Traded Fund (ETF) on November 20, the fund house said at a press meet held in Mumbai today.
The third FFO will open for subscription on November 28 and close on November 30.
It will raise Rs 8,000 crore through Reliance Nippon CPSE ETF with a greenshoe option to retain Rs 4,000 to Rs 6,000 crore.
According to sources from the finance ministry, the ETF will have a greenshoe option to retain Rs 4,000 to Rs 6,000 crore.
The government will offer a discount over 4.5 percent in its third CPSE ETF FFO.
Reliance Nippon Life Asset Management had filed draft papers with a third follow-on offer of CPSE ETF last month.
FFO is a part of a larger divestment program announced by the Department of Investment and Public Asset Management (DIPAM).
The FFO is open for all categories of investors including anchor investors, retail investors, retirement funds, qualified institutional buyers (QIBs), non-institutional and foreign portfolio investors (FPIs).
"The timing of the issue will help investors benefit from their exposure in a diversified basket like CPSE ETF that includes a list of distinguished PSUs who are leaders in their respective sectors," said Sundeep Sikka, Executive Director and Chief Executive Officer, Reliance Nippon Life Asset Management.
The government raised Rs 3,000 through the initial offering of CPSE ETF in March 2014, and Rs 8,500 crore in two tranches in 2016-17 (Apr-Mar).
The government, which aims to collect Rs 80,000 crore from divestment in the current financial year ending March, has so far raised about Rs 15,300 crore, including Rs 5,300 crore through the offer-for-sale (OFS) in Coal India. The government had raised a record Rs 1 lakh crore from divestment in 2017-18.
After closing of the FFO, the units will be listed on the stock exchanges in the form of an ETF tracking the Nifty CPSE Index.
The number of stocks in the CPSE index has increased to 11 from 10 stocks with the entry of four new companies –NTPC, NLC, SJVN and NBCC from the power and construction sectors.
The three companies GAIL, Container Corporation and Engineers India exited the index as the disinvestment target of the government in these three companies were achieved.
Going ahead the companies will be removed from the index if the government holding in these companies falls to 53 percent from 55 percent.
Henceforth, the capping of individual stocks in the CPSE basket also has been reduced to 20 percent from the earlier 25 percent.
In the last three years, CPSE ETF has given an annualised return of 7.1 percent, lower than the Nifty return of 11.2 percent, while over the last one year it has fallen 13.4 percent as compared to the Nifty which gained 5.6 percent during the same period.CPSE ETF is a passive investment fund that was created to help the government in its divestment program of divesting stake in Central Public Sector Enterprises (CPSE) through ETFs.