The Department of Investment and Public Asset Management (DIPAM), Ministry of Finance has offered discount of 4.5% to investors in the third further fund offer (FFO) of Reliance Nippon Life Mutual Fund CPSE ETF.
The government plans to divest its stake in 11 PSUs through the Central Public Sector Enterprise (CPSE) ETF. The FFO opens for subscription on November 28 and closes on November 30.
The government hopes to raise Rs.14,000 crore from this ETF. In fact, the fund house has proposed to raise upto Rs. 8,000 crore in this FFO with an option to retain oversubscription upto Rs. 6000 crore.
The fund house claims that investors would stand to earn 8% from this FFO. “The CPSE ETF is attractive because the dividend yield of the CPSE ETF is over 5% last fiscal. Since the government is yet to announce dividend, investors would stand to earn over 8% return (4.5% from the discount and 5% from the dividend). In addition, CPSE ETF has a very low expense ratio of 0.95 bps,” said the company.
In a press release, Sundeep Sikka, ED and CEO, Reliance Nippon Life MF said, “The CPSE ETF FFO offers a compelling opportunity for investors, especially retail and retirement funds, to invest in the India growth story at an attractive valuation, low expense and embedded discounts.”
The fund house also plans to reach out to retirement funds like EPFO to get them to deploy a portion of their retirement corpus in CPSE ETF. “We would like to reach out to retirement funds to invest in FFO3 and consider this as an opportunity to secure their funds and benefit from the growth of these PSUs some of which are Navratnas, Maharatnas, Miniratnas and are either sector leaders or near monopolies in their respective sectors,” said Sikka.
With the inclusion of four companies from power sector and exclusion of three companies such as Gail India, Container Corporation of India and Engineers India, the index now constitute of 11 companies - ONGC, Coal India, Rural Electrification Corporation, Indian Oil Corporation, Oil India, Power Finance Corporation, Bharat Electronics, NTPC, NBCC India, NLC and SJVN.