Following a positive response from investors for the Central Public Sector Enterprises Exchange-Traded Fund (CPSE ETF), about 15 new CPSEs have expressed interest in raising money via debt ETF next fiscal.
“As many as 10-15 CPSEs have shown interest in trying out the debt ETF route for fund-raising in the next fiscal. These would be ‘AAA’ or ‘AA’ rated companies. The bonds would have varying tenures of two, three or five years,” said a senior official from Department of Investment and Public Asset Management (DIPAM).
Finance Minister Arun Jaitley had, in the 2018-19 Budget, announced launching of a debt ETF, following the success of equity ETFs like CPSE and Bharat-22 ETFs. The Centre has already invited bids for assigning Asset Management Companies (AMC) for creating, managing and launching a debt ETF.
While inviting bids from AMCs, the Finance Ministry has said that the public sector banks can also raise funds through debt ETF. The official, however, said that public sector banks would not initially raise funds using this route. “The CPSEs are also interested in seeing if the fund-raising through debt ETF would lower their borrowing cost. The AMCs will decide which CPSEs should be clubbed in the ETF for lowering the cost,” the official added.
DIPAM has to meet the disinvestment target of Rs 80,000 crore this fiscal. The CPSEs had come to the rescue of the government’s divestment plans, which was derailed after it failed to divest national carrier Air India.
So far this year, about Rs 32,998 crore has been raised, including the two tranches of Bharat-22 ETF, which garnered about Rs 22,900 crore. With a combination of public sector and a few large-cap private sector companies, the popular Bharat-22 ETF is set for a third offering in January.
“We have got good response from Bharat-22 ETF. The third tranche of it will be launched in February and we hope to raise Rs 10,000-12,000 crore from it,” a Finance Ministry official told TNIE last month. In December, the third fund offer of CPSE ETF saw tremendous response, raising Rs 17,000 crore.
PSBs in the ring
While inviting bids from Asset Management Companies, the Finance Ministry has said that the public sector banks can also raise funds through debt ETF. A Department of Investment and Public Asset Management official, however, said that public sector banks would not initially raise funds using this route
This article provided by NewsEdge.