Reliance MF's CPSE ETF to open on Mar 14; to raise Rs 2,500-cr

New Delhi: The government will next week launch the third tranche of CPSE Exchange Traded Fund, managed by Reliance Mutual Fund, to garner about Rs 2,500 crore.

The further fund offer (FFO) will open for anchor investors on March 14, while subscription for retail investors would begin from March 15 and will continue till March 17, sources said.

An upfront discount of 3.5 percent would be offered to all category of investors, they added.

"The government is expected to fetch Rs 2,500 crore from the third tranche of CPSE ETF," a source said.

CPSE ETF, which functions like a mutual fund scheme, comprises scrips of 10 PSUs - ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India.

The fund-raising will help the government inch towards its Rs 56,500-crore disinvestment target for the current fiscal.

As per draft documents filed with the Securities and Exchange Board of India (Sebi), Reliance MF has applied for the second FFO of the Central Public Sector Enterprises Exchange Traded Fund (CPSE ETF).

The government had raised Rs 6,000 crore through the second tranche of CPSE ETF in January and Rs 3,000 crore from first tranche in March 2014.

"Reliance Mutual Fund is privileged to partner with the government for its third consecutive tranche of divestment in CPSE stocks using the ETF route.

"We are equally delighted that second ETF tranche - that was oversubscribed over three times - proved a profitable investment for investors and listed at a premium. We will continue to work with DIPAM in its future disinvestment programmes," Reliance Mutual Fund Chief Executive Officer Sundeep Sikka said.

The government had launched the CPSE ETF in March 2014 under which retail investors could invest a minimum of Rs 5,000 to buy units.

CPSE ETF was originally managed by Goldman Sachs MF, which was acquired by Reliance MF in October 2015. Finance Ministry in September gave its nod for the transfer of management of CPSE ETF to Reliance Mutual Fund.

Apart from the existing CPSE ETF, the government is planning to create a new ETF comprising stocks of PSUs. It has already appointed ICICI Prudential Mutual Fund for managing the second CPSE ETF.

As per the draft prospectus, the government intends to sell further CPSE shares to the CPSE ETG scheme and the fund house has therefore formulated the FFO, which would be offered to the public for subscription.

The fund, out of the proceeds of the FFO, would purchase the CPSE shares as represented in the constituent companies of the Nifty CPSE Index in similar composition and weightages as they appear in the Nifty CPSE Index.

The government will sell the shares at a discounted rate to the scheme for the benefit of the unit holders and the mutual fund will in turn create and allot the units.

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.