The sixth tranche (fifth follow on offer) of Central Public Sector Enterprise Exchange-Traded Fund (CPSE ETF) is set to hit the markets next week. The offer size would be Rs.8000 crore with an option to retain additional subscription under green shoe option.
The issue will only be open for one day each for anchor investors (July 18) and non-anchor investors (July 19, 2019) such as retail investors and HNIs.
Reliance Nippon Life MF will be managing this tranche of CPSE ETF too. In a press release, Reliance Nippon Life MF shared that CPSE ETF is attractive for investors as the dividend yield of the CPSE ETF index is over 5%. In addition, Nifty CPSE index is trading at a 36-45% discount to the Nifty 50 index.
In the budget 2019, the finance minister has proposed that CPSE ETFs would get tax benefits like ELSS as ETFs have turned out to be a good instrument for Government of India’s divestment programme. This means, investors investing in such ETFs could get tax deduction of up to Rs.1.50 lakh under section 80C. However, it is not clear if such a benefit is applicable on this issue.
So far, government has raised Rs. 38,500 crore through the CPSE ETF NFO in March 2014 and its subsequent four tranches. This fiscal, government has kept a disinvestment target of Rs. 1.05 lakh crore and this will be the first tranche post the budget.
