Business Standard reported that the Department of Disinvestment has proposed an exchange traded fund of listed public sector enterprises that would constitute an offering of up to 3%government holding.
According to divest.nic.in,the total market capitalization all 52 central public sector enterprises is at INR 1.232 million tonne.Of these,the top ten alone account for a combined market cap of INR 0.977 million tonne.A 3%dilution in major state owned firms could make the ETF as big as INR 30,000 crore,easily the single largest equity fund in the country.Since the dilution is unlikely to happen in one go,the fund may reach this size over a period of time.
The draft Cabinet said that currently under inter ministerial consultation,will be sent to the Cabinet Committee on Economic Affairs for approval in the first week of January.
The finance ministry wing has also indicated that up to 5%of the new fund,comprising stocks of listed CPSEs,would be reserved for the eligible employees of these companies,who will form part of the portfolio.However,the allocation of the ETF to CPSE employees under the reservation would not exceed INR 2 lakh.
An ETF comprises a basket of assets which trades on a bourse like a stock and tracks an index.
According to the draft Cabinet note,the ETF is aimed at helping minimize market disruptions in public offerings of listed CPSEs and raising the government's ability to monetize partial stake in listed firms,some of which have low liquidity and free float.The government would also benefit from a pricing perspective,as some discounts could be back ended.
The proposed ETF would be launched within 5 months of the final approval,provided the market conditions were favorable.
