Govt plans to launch Bharat-22 ETF by October-end, expects Rs 12,000 crore

This Diwali, the Centre is looking to rake in nearly Rs 12,000 crore from retail investors by divesting stake in 22 companies via the Bharat 22 exchange traded funds (ETFs),

The new fund offer (NFO) is likely to hit the market by October-end or early November and will have a core size of Rs 5,000-6,000 crore with an option to retain oversubscription of same amount.

According to the report, the government is giving final touches to the Bharat-22 ETF and already has approval from the Securities and Exchange Board of India for it.

Last month, ICICI Prudential Asset Management filed a draft document with SEBI for the Bharat-22 ETF. The fund will comprise of 22 blue-chip public sector units including government banks and holdings in Specified Undertaking of the Unit Trust of India (SUUUTI).

Sector weight has been capped at 20 percent and individual stock weight has been capped at 15 percent to ensure diversification.

The ETF is expected to be launched after GIC Re’s IPO process is complete. “The market conditions are once again improving and domestic investor sentiment continues to remain positive. The Centre would want to cash in on that,” a source told the newspaper.

GIC Re’s IPO will hit the market on Wednesday.

The Centre will sell its underlying stake in the 22 stocks, at a price slightly lower than the prevalent market price, according to the size of the ETF.

The report further said that retail investors who apply for a ticket size of less than Rs 2 lakh could be offered a discount of 5 percent.

A total of rs 25,000 crore is expected through the Bhart-22 ETF and one or two tranches could be launched in the fourth quarter of the year.

This is not the first time the ETF route is being used by the government to raise money. In 2014, the government had launched the Central Public Sector Enterprises (CPSE) ETF at Rs 17.45 per unit and raised Rs 3,000 crore.

In 2008, the government had raised Rs 8,500 crore via the CPSE in two tranches. All three times, the CPSE ETF was oversubscribed. However, it was focused solely on the energy sector.