More Stories

Informist, Monday, Apr. 21, 2025

 

By Sagar Sen, Priyasmita Dutta, and Krity Ambey

 

NEW DELHI – The finance ministry may re-evaluate the option of diluting the government's stake in select public sector companies through exchange traded funds, two senior officials said. Currently, there are two ETFs -- Central Public Sector Enterprises ETF and Bharat 22 ETF -- through which the government had previously sold stake in PSUs. The government, however, refrained from bringing further fund offers after the COVID-19 pandemic struck in 2020.

 

"We may look at reviving the option of stake sale through ETF but much deeper deliberations will be needed," one of the officials told Informist. "Now that we are looking to do a lot more minority stake sale in PSUs and intend to nudge mutual fund managers to include PSU stocks in their portfolios, it would make sense to brush (the) dust off these existing instruments."

 

In a media interaction earlier this month, Department of Investment and Public Asset Management Secretary Arunish Chawla had said the inclusion of PSU stocks in mutual fund portfolios would encourage retail investors and minority shareholders to deploy their savings in these instruments.

 

The second official said both the ETFs -- the CPSE ETF and the Bharat 22 ETF -- have been put in the cold storage and a lot of discussions would be needed to revive them and they eventually need to be recalibrated and rebalanced so that the government's shareholding does not fall below 51% in any of the ETF constituents.

 

The finance ministry had stopped further fund offers since 2019-20 (Apr-Mar) saying that frequent tranches of ETFs impact the valuation of PSUs adversely. Also, the government stake in some of the blue-chip companies in these ETFs had come close to 51%. According to the guidelines in the Companies Act, the government must hold at least 51% stake in a company for it to be categorised as a public sector entity.

 

The disinvestment department collected INR 308.69 billion in FY20, when both the ETFs were last used to dilute the government's stake in companies included in these ETFs.

 

Bharat-22 ETF was launched in 2017 and is managed by ICICI Prudential Mutual Fund. The ETF has shares of PSUs like Coal India Ltd., GAIL (India) Ltd., Power Grid Corp of India Ltd., NTPC Ltd., Indian Oil Corp Ltd., Oil & Natural Gas Corp, Bharat Petroleum Corp Ltd., and National Aluminum Co., State Bank of India, and also the government owned shares in blue-chip private companies like Larsen & Toubro, Axis Bank and ITC. The CPSE ETF was launched in 2013, and its constituents include shares of ONGC, Coal India, IOC, and Power Finance Corp.

 

The government aims to raise INR 470 billion from divestment of its stake in PSUs and asset monetisation in the current financial year, higher than the revised estimate of INR 330 billion for FY25. The government discontinued the practice of giving a specific target for divestment receipts in the Interim Budget for FY25. As such, there is no target for disinvestment for FY26.  End

 

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.