After getting an overwhelming response to CPSE ETFs, the government is planning to raise some more capital through the ETF route with Bharat 22 ETF.
The Union Finance Minister Arun Jaitley has today announced the launch of a new ETF called ‘BHARAT 22’. ICICI Prudential Mutual Fund will manage the new ETF in which the government plans to divest its stake in 22 companies.
Bharat 22 consists of 22 stocks of CPSEs, PSBs & strategic holdings of SUUTI. Compared to energy heavy CPSE ETF, Bharat 22 is a well diversified portfolio with 6 sectors (basic materials, energy, finance, FMCG, industrials & utilities). The Bharat 22 Index will be rebalanced annually.
The Bharat 22 constitutes of companies like National Aluminium, ONGC, Coal India, IOC, BPCL, SBI, Axis, Bank of Baroda, Rural Electrification Corporation, Power Finance Corporation, Indian Bank, ITC, Bharat Electronics, Engineers India NBCC, Power Grid, NTPC, Gail India, NHPC, NLC India and SJVN. The Government of India holds a majority stake in these companies.
While ICICI Prudential AMC will be the ETF manager, Asia Index Private Limited (JV BSE and S&P Global) will be the index provider, said the press release.
In the Budget Speech of 2017-18, the Finance Minister had promised to use ETF as a vehicle for further disinvestment of shares. The target for CPSE’s disinvestment in 2017-18 was set at Rs.72,500 crore.
Globally ETF assets have grown significantly with an AUM of $4 trillion as on June 2017. ETFs are likely to touch AUM of $7 trillion by 2021, say some experts. Large Investors such as pension funds prefer investing in ETFs due to the benefits of low cost, transparency and liquidity.
In India, ETFs has grown almost five times in just three years. Its AUM grew from Rs.11,400 crore in March 2014 to Rs.54,000 crore in June 2017.
In FY 2016-17, the government has raised Rs.8500 by divesting through CPSE ETF.
