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The Disinvestment Department is working on revamping the existing CPSE Exchange Traded Fund (ETF) to make it retail investor friendly by reducing the minimum investment criteria.
The government had launched the CPSE ETF, comprising scrips of 10 PSUs, in March 2014 under which retail investors have to invest a minimum of Rs 5,000 to buy units.
“The composition of the stocks in CPSE ETF would remain the same. We are looking at changing the unit size so that they become smaller so that retailers can participate more,” an official said.
The 10 PSUs which are part of the fund basket are Oil & Natural Gas Corp, GAIL India, Coal India, Indian Oil, Oil India, Power Finance Corp, Rural Electrification Corp, Container Corp, Engineers India and Bharat Electronics.
An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
Further, the department is also exploring an option of offering ETFs in ‘tranches’ as against on ‘tap’ basis, currently, the official added.
“It is in tap mechanism, which we are taking to tranche mechanism because we are changing certain clauses to make it more retail investor friendly,” the official said.
While ‘tap’ issue refers to selling securities from past issues and avoid certain transaction or legal costs and expedite fund raising.
Tranche is a term often used to describe a specific class of bonds within an offering wherein each tranche offers varying degrees of risk to the investor.
Goldman Sachs, which manages the CPSE ETF, is working on the changes. “We will take approval of market regulator SEBI before bringing in the changes,” the official added.
The CPSE ETF had garnered Rs 3,000 crore to the exchequer when it was launched in March last year. The ETF was an open-ended fund with the face-value of Rs 10 per unit.
As per the terms of the ETF, individual investors can invest a minimum of Rs 5,000, while the maximum limit Rs 10 lakh.
Non-institutional investors/qualified institutional buyers can invest in the scheme with a minimum investment amount of Rs 10 lakhs, as per the offer document of CPSE ETF filed with SEBI before the launch of the fund.
The Government plans to launch the second tranche of CPSE ETF in current fiscal as part of its disinvestment pipeline.
The governments hopes to garner Rs 41,000 crore through PSU disinvestment in 2015—16.
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