Reliance Nippon Life Asset Management’s 6th tranche of CPSE ETF likely to hit the market next week

Reliance Nippon Life Asset Management that manages CPSE ETF (Central Public Sector Enterprises ETF) for the government may unveil the sixth tranche of the scheme next week, according to industry sources.

For anchor investors and non-anchor investors, the issue is likely to remain open for a day on July 18 and July 19 respectively, sources told Moneycontrol.

The sixth tranche of CPSE ETF (Fifth follow-on offer) will have a base size offer of Rs 8,000 crore with an additional greenshoe option. The CPSE ETF is likely to be listed on July 29.

The ETF may offer a discount price to the investors. The CPSE ETF is also attractive because on the dividend yield of the CPSE ETF index is over 5 percent. Nifty CPSE index is trading at a 36-45 percent discount to the Nifty50 Index valuation.

The first offering of CPSE ETF was launched in March 2014. Since then, the CPSE ETF has garnered Rs 38,500 crore with around 8.76 lakh investors.

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The earlier tranche of CPSE ETF was oversubscribed 3.05 times while the fifth tranche (fourth follow-on offer) witnessed a subscription of over Rs 30,000 crore against the issue size of Rs 10,000 crore, including the greenshoe option.

This is the first tranche after the general elections and the budget. In this financial year, the government has set a disinvestment target of Rs 1.05 trillion.

In a bid to boost divestment proceeds, in FY20 Union Budget, the Finance Minister Nirmala Sitharaman proposed to give Equity Linked Saving Scheme benefit under section 80C of Income Tax Act to new unit-holders of the ETFs.

Currently, investments made under Equity Linked Saving Schemes are eligible for tax deduction of up to Rs 1,50,000 under section 80C of the Income Tax Act. However, there is a mandatory three-year lock-in period.

ETFs have been a preferred route for disinvestment in public sector enterprises after the success of CPSE ETF and Bharat 22 ETF.

So far in 2019, the government raised Rs 71,100 crore from the ETFs, including Rs 45,100 crore in 2018-19 (Apr-Mar).

It now aims to raise Rs 90,000 crore through divestment in 2019-20, compared with Rs 85,300 crore raised in 2018.