Finance Minister Arun Jaitley on Friday announced the launch of a new exchange-traded fund (ETF), called Bharat-22, which comprises 22 scrips including ONGC, IOC, ITC, SBI and Axis Bank. This is a much broader ETF than the earlier fund and comprises stocks of banks as well. This will be the second ETF from the government after it raised over Rs 8,509 crore from three tranches of the CPSE ETF.
Bharat-22 will have a diversified portfolio of six sectors, including energy, fast-moving consumer goods (FMCG), finance, basic material and industrial and utilities, Jaitley said while briefing reporters. ICICI Prudential AMC will be the ETF manager and Asia Index Private Limited will be the Index provider.
Apart from banks and CPSEs, the ETF will include shares of government’s strategic holding in Axis Bank, ITC and L&T held through SUUTI (Specified Undertaking of Unit Trust of India). “While selecting each of these sectors, we have kept in mind sectoral reforms which have had direct impact on the valuation of these shares… We believe that this ETF will be a fairly successful one,” Jaitley said.
ETF functions just like a mutual fund scheme but its units are traded on the stock exchange. Among energy and mining companies ONGC, IOC, BPCL, Coal India and Nalco are part of the new ETF. In the Budget Speech of 2017-18, Jaitley said the government will use ETF as a vehicle for further disinvestment of shares.
The government plans to raise a total of Rs 72,500 crore through divestment in the current fiscal year. The government has so far raised around Rs 9,300 crore through nine disinvestment transactions. The other CPSEs on the list are Bharat Electronics, Engineers India, NBCC, NTPC, NHPC, SJVNL, GAIL, PGCIL and NLC India.
Only three PSU banks — SBI, Indian Bank and Bank of Baroda — figure in the Bharat-22 index. A list of 22 companies effectively means that small tranches of government holding in CPSEs and PSBs will be included, he added. Jaitley said the inclusion of three PSU banks in Bharat-22 is “consistent” with the government’s policy. “Government’s stake can go down to 52 per cent in PSU banks and whenever possible, we will look for a possible consolidation,” he added.
ETF investment is less risky and provides liquid assets which are traded real time and is a transparent mode of investment, Jaitley said. “Globally ETF assets have grown significantly, with around $4 trillion worth Assets Under Management (AUM). These are expected to touch $7 trillion by 2021. Large Investors (Sovereign/Pension Funds) prefer investing in ETFs,” the finance ministry said in a statement.
The first CPSE ETF consisted of scrips of 10 PSUs – ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India. Asked when the first tranche of Bharat-22 will hit the market, DIPAM Secretary Neeraj Gupta “It will be different tranches as per requirement of the government,” he said. DIPAM is the Department of Investment and Public Asset Management. “Ninety per cent of the equities included are also traded in futures,” Gupta said.