Govt to speed up ETF plans

 Faced with hurdles in the Rs 30,000 crore divestment programme, the Finance Minister has decided to expedite the process of setting up exchange traded funds to sell shares of PSUs.

"We will complete the process of appointment of merchant bankers in the next two weeks," a senior finance ministry official told PTI.

An ETF is an investment fund traded on stock exchanges much like stocks. The fund would be benchmarked against an index on the stock exchange.

"We would benchmark the ETF against a PSU index. We are discussing which index would be taken as a benchmark," the official said.

At present, PSU Index of BSE tracks the performance of listed equity of PSU companies.
"We will also take into account the opinion of the ETF adviser as to which index should be the benchmark. We hope to appoint an adviser by this month," the official said.

The DoD has invited bids from reputed advisers for setting up the ETF for selling shares of PSUs to meet the disinvestment target of Rs 30,000 crore for this fiscal.

The DoD had invited bids from internationally reputed merchant bankers, investment bankers, consulting firms and asset management companies, who have advised or have been involved in a relevant capacity or have launched an equity ETF for the same.
After the appointment of the adviser, the DoD would appoint an ETF provider, which will manage the fund on behalf of the government.

Under the planned ETF model, the DoD is planning to create a pool of shares of the PSUs it wants to divest and create a fund (ETF), which would be listed on stock exchanges.
The DoD, however, is yet to decide the quantum of shares in the PSUs, which are identified for divestment, that would be part of the proposed ETF.

The Vijay Kelkar committee has suggested that government should consider floating ETF comprising shares of only those PSUs which have good financial track records.
The government has already identified a host of companies --  NALCO, MMTC, Hindustan Copper, NMDC -- for selling its minority stake sale.

Although six months have passed in the current fiscal, the government so far has not been able to come out with a public issue.