Department of Disinvestment invites bids from advisors for launching ETF for PSUs

NEW DELHI: The Department of Disinvestment (DoD) has invited bids from internationally-reputed advisors for setting up an Exchange Traded Fund (ETF) for selling shares of PSUs to meet the disinvestment target of Rs 30,000 crore for this fiscal.

DoD in a public notice, said proposals are invited 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.

The ETF, which is an investment fund traded on stock exchanges much like stocks, would have an underlying benchmark which could be an index on the stock exchange.

"The Government of India intends to create and launch a CPSE (Central Public Sector Enterprise) ETF," it said.

As per the request of proposal to be floated by the DoD, the bidders of global merchant bankers should have advised or have been involved in a relevant capacity or have launched an equity ETF of the size of Rs 1,000 crore or more between September 2009 and June 2012.

The last date for submitting proposal for setting up of CPSE ETF is October 8, it added.

An inter-ministerial group (IMG) on creation of ETF comprising CPSE shares, met earlier this month and discussed the modalities.

After the appointment of the advisor, 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 identified for divestment, that would be part of the proposed ETF.

The ETF market has the potential to touch $ 5 billion (around Rs 26,000 crore), Disinvestment Secretary Mohammad Haleem Khan had said.

The Cabinet Committee on Economic Affairs on Friday approved the minority stake sale in four PSUs -- NALCO, MMTC, Hindustan Copper, NMDC -- which is likely to fetch around Rs 15,000 crore to the exchequer.

Finance Minister P Chidambaram had last month asked officials to expedite the process of disinvestment so that state-owned companies could hit stock markets in time and help government achieve the target of Rs 30,000 crore in 2012-13.

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