Govt launches ETF for divestment in 22 public sector units

Finance minister Arun Jaitley today announced the launch of a new exchange traded fund (ETF), called `BHARAT 22', which represents 22 stocks of central public sector enterprises (CPSEs), public sector banks (PSBs) and strategic holding in Specified Undertaking of the Unit trust of India (SUUTI).

The new ETF that would sell government's stake in 22 companies is aimed at giving a boost to government's lacklustre disinvestment programme.

Compared to the earlier energy-heavy CPSE ETF, `Bharat 22' is a well diversified portfolio with six sectors, including basic materials, energy, finance, FMCG, industrials and utilities.

The `Bharat 22' Index will be rebalanced annually. ICICI Prudential AMC will be the ETF manager and Asia Index Private Limited (JV BSE and S& P Global) will be the index provider.

Finance minister Arun Jaitley had, in the Budget speech of 2017-18, promised to use ETF as a vehicle for further disinvestment of shares. The target for CPSE disinvestment in 2017-18 was set at Rs72,500 crore. During the current financial year 2017-18, the government has realised approximately Rs9,300 crore through nine disinvestment transactions so far.

Globally ETF assets have grown significantly, with about $4 trillion worth of assets under management (AUM). These are expected to touch $7 trillion by 2021. Large investors (sovereign/pension funds) prefer investing in ETFs due to the benefits of  ETF being low cost and less risky. These are also highly liquid assets with transparency in investment and can be traded at real time market price.

The `Bharat 2' ETF basket comprises the following PSU stocks:

Energy: Oil and Natural Gas Corporation,  Indian Oil Corporation, Bharat Petroleum Corporation and Coal India Ltd;

Finance: State Bank of India, Axis Bank Ltd, Bank of Baroda, Rural Electrification Corporation Ltd, Power Finance Corporation and Indian bank;

FMCG: ITC Ltd;

Industrials: Larsen & Toubro Ltd, Bharat Electronics Ltd, Engineers india Ltd, and NBCC (India) Ltd; and

Utilities: PowerGrid Corporation of India, NTPC Ltd, Gail India Ltd, NHPC Ltd, NLC India Ltd and SJVN Ltd.