Govt launches 'Bharat -22' ETF to push laggard disinvestment

Seeking to arrest lacklustre disinvestment, the government on Friday launched a new exchange traded fund (ETF) that would sell the government's stake in 22 companies.


Finance Minister Arun Jaitley unveiled the policy decision to launch 'Bharat-22' at a media briefing here.


An ETF is a marketable security that tracks an index. It trades like a common stock on a stock exchange and experience price changes throughout the day as they are bought and sold.


Jaitley said the fund will comprise Central Public Sector Enterprises, state-owned banks, and will have strategic holding in the Specified Undertaking of the Unit trust of India (SUUTI).


"The ETF will be a diversified portfolio of six sectors, and there will be a sectoral capping of 20% and a single company stock cap of 15%," Jaitley said.


State Bank of India, Bank of Baroda, Indian Bank and public sector undertakings Nalco, ONGC, IOC, BPCL and Coal India will feature in the fund. The ICICI Prudential will manage the new ETF.


Out of the Budgetary target of Rs 72,500 crore of disinvestment in the financial year 2017-18, the government has been able to garner a little above Rs 9,000 crore so far.


The new ETF is expected to accelerate the disinvestment process. Emerging market ETFs are surging in 2017, and India ETFs have so far been the best performers as investors continue to pour money into Indian stocks on optimism of more structural reforms.


Globally, ETF assets have grown significantly over the years. As of now, there are $4 trillion worth Assets Under Management (AUM) across the world. The number is 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. ETFs are highly liquid assets, transparent investment and can be traded at real time market price,” the finance minister said.