By James Eugene

In a move to monetise its holdings, India’s government unveiled plans on Tuesday to launch a new exchange traded fund (ETF) that comprises primarily of central public sector enterprises (CPSEs) and its stakes in other corporate entities. This is part of the government’s ongoing plan to sell its stake in CPSEs through a process of strategic disinvestment.

According to the India Times, the Finance Ministry released an advertisement directed at asset management companies to help create and launch the new ETF. The advert said:

“Request for proposals (RFPs) to engage an asset management company for creation and launch of a new Exchange Traded Fund (ETF) comprising shares of listed CPSEs and other corporate entities”

After the applications are reviewed, the Department of Investment and Public Asset Management – a department under the Ministry of Finance – will choose one asset management company, mostly likely one with experience in launch and management of ETFs. The deadline for submission is on August 24th 2016. Registered mutual funds or asset management companies with 5 years experience in fund management will be eligible to make bids.

The new ETF will be an addition to an already existing CPSE ETF, which was launched in March 2014 and was managed by Goldman Sachs Asset Management before it sold its India mutual funds business to current managers Reliance Capital Ltd. At the time of launch, investors received a 5% discount in the “normal” price, along with other loyalty bonuses along the way. The government will probably be expected to once again provide similar incentives to investors for the launch of the next ETF. The top five holdings in the current CPSE ETF are: Coal India Ltd (25.07%), Oil & Natural Gas Corp Ltd (23.72%), Indian Oil Corp Ltd (13.58%), GAIL India Ltd (11.46%) and Container Corporation of India Ltd (7.60%).

Companies that may be up for disinvestment through the new ETF include Axis Bank, ITC and Larsen & Toubro. It may also contain stocks from financial companies (banks and insurance firms), according to Business Standard.

India’s government will take into account the opinions of whoever gets to launch the new ETF as it continues its disinvestment process. The government has already sold a minor proportion of its stake in the likes of Indian Oil Corporation and NTPC Ltd, but also has stake sales lined up for two fertilizer companies: National Fertilizers Ltd and Rashtriya Chemicals and Fertilizers Ltd.

More information on India’s Disinvestment Policy can be found here and also here.