Reliance Mutual Fund on Tuesday announced the third Further Fund Offer (FFO) for its CPSE ETF (Central Public Sector Enterprises – Exchange Traded Fund). As part of the third FFO, the fund house proposes to raise up to Rs. 14,000 crore, which includes a base amount of Rs. 8,000 and between Rs. 4,000 to Rs. 6,000 crore as an additional green shoe option.
An upfront discount of 4.5 percent is being offered by the government to all categories of investors, according to Reliance Mutual Fund. This discount would be greater than the Bharat 22 ETF offering of 2.5 percent. The FFO is part of an overall disinvestment plan by the Government of India, which was announced earlier by the Ministry of Finance.
“We feel confident that the timing of the issue will help investors benefit from their exposure in a diversified basket like CPSE ETF that includes a list of distinguished PSUs who are leaders in their respective sectors,” says Sundeep Sikka, CEO of Reliance Nippon Life Asset Management in a press release issued by the AMC.
The third FFO is open for all categories of investors including retail investors, anchor investors, non-institutional investors, foreign portfolio investors, among others. Anchor investors are the investors who invest in the initial public offerings and are qualified institutional buyers.
The dividend yield of Nifty CPSE Index is about 5.25 percent*. The CPSE ETF has an expense ratio of 0.95 bps. The FFO will open (and close) for anchor investors on November 27, 2018, whereas for non-anchor investors it will open on November 28 and close on November 30, 2018.
Earlier this month, the number of stocks in CPSE index had increased to 11 from ten stocks with the addition of four new companies – NTPC, NLC, SJVN and NBCC.
Additionally, the maximum cap on each stock in the CPSE basket has been reduced from 25 percent to 20 percent.
Unlike Bharat 22 ETF, the CPSE ETF is IRDAI compliant, allowing insurance companies to invest in the ETF.
Other Funds by Nippon India Asset Management
{Data as on Feb 19, 2020; Source: Value Research}