Retail investor enthusiasm in CPSE ETF picks up: Reliance Nippon

According to Sikka, in the last five years the CPSE ETF basket has been able to beat the Nifty by about 15-20 percent.  Moreover, with expectation of the India growth story continuing, the companies under CPSE ETF basked will do well.Below is the verbatim transcript of Sundeep Sikka's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Latha: Can you start by telling us what the reception has been, acceptance has been for this fund and what we can look forward to?A: The kind of response we have got, we are overwhelmed by the kind of response. The issue size was Rs 4,500 with a green shoe option of Rs 1,500 crore and we have been all mobilised about 13,800 crore and for more than 2,80,000 investors.What is more interesting is the quality of response that we have got. The total anchor book which was Rs 1,800 crore, we have got a subscription of about Rs 6,000 crore on money coming in from foreign institutional investors, domestic institutions and the main book, which was totally subscribed by retail as well as the pension money both coming from public and the private sector.The quality of response clearly shows that we have achieved twin objective of the ministry of finance -- A] has been the disinvestment, B] the financial inclusion because we have not seen the kind of retail response that we have seen coming from more than 300-400 citizen, town small investment coming into ETF. This has never happened before. So we are expecting -- this is the starting of a new trend where retail investors who have never been come into ETF now, this is going to be starting of the ETFs success story in India.Anuj: This was already listed, this was the follow-on issue and we have seen a big rally in the CPSE-ETF. You said you look forward to more partnership with the government. Would it be fair to assume that this would be a preferred route from hereon?A: I would let government answer this but broadly the success of this clearly shows this seems to be a successful route for the government and the kind of response in a short period of three days, the Rs 6,000 crore that we have raised -- this is far more convenient and preferred route for the government going forward.This is the second follow-up offering. I am sure in times to come, disinvestment will always remain an important part for the government and seeing the success and the kind of retail participation, I am sure this is going to be one of many more ETF offerings which is going to be coming from the government.Sonia: I was asking you about the kind of growth that you see for these companies and compared to the Nifty, by when do you think that these companies as a whole, this basket could either perform in tandem with the Nifty or even outperform it?A: If you were to look at -- while I will not be able to talk about the future but if you were to look at last one year or the last five years, this basket, this CPSE-ETF has been able to beat the Nifty by about 15-20 percent. I was looking at it today morning -- the CPSE-ETF over the last one year has given the return in excess of 30 percent compared to Nifty of about 13-14 percent and even if you were to look at the last five years ever since this issue of CPSE has been launched. There has been outperformance of 10 percent.So again if you were to look at it, if you look at the basket, all these stocks, which are there, it constitutes of the industries which are required to grow for India to keep growing at the rate of 8-8.5 percent and all the respective companies, the leaders in those sectors. If the India growth story will continue, we believe it will continue, these companies and the sectors will do well. So we clearly expect these companies and also take into account whether from the valuation perspective on a dividend yield, the Nifty today has a dividend yield, they have a dividend yield of 1.5 percent compared to this basket has a dividend yield in excess of 4 percent. So we expect outperformance from this basket going forward also.Anuj: Since 100 percent allocation was to retail and they got 5 percent discount, is there a case of near-term supply pressure purely because you have already got 5 percent discount. So could we have some bit of supply issue?A: I will not like to comment on that but the way I see, whenever you get retail investors and you see majority of the issues been firm allotment to retail and the balance has been given to provident funds, clearly all these are long-term investors. Even if you see some kind of a pressure over the next few days, it will stabilise because the underline basket seems to be very good. So we expect most of the investors to be long-term and whatever oversupply that you are seeing today or the next few days, this is a temporary phenomenon.Latha: I had the same question that Anuj Singhal had but from a slightly longer-term. If the investors are to expect regular tranches coming from the government in terms of units, then that itself will be an overhang, won’t it?A: It would be better for the government to answer that question but I clearly expect disinvestment has been an important part for every Union Budget. Disinvestment has been a part of that. So we clearly see -- ETFs will help our government to achieve that objective. How and what and what amount -- that is better if that question is directed to the government more than us.