CPSE ETF Review - 4th Tranche FFO3 28th Nov 2018

Published on Tuesday, November 20, 2018 by Dilip Davda | Modified on Friday, March 20, 2020

• This is the 4^th tranche of CPSE ETF since March 2014.
• CPSE ETF consists of 11 PSUs (that includes Maharatnas, Navratnas, Miniratnas and Sector Leaders.
• Previous CPSE ETF currently trades around Rs 25 giving a return of 8% plus since inception.
• CPSE ETF FFO3 offers upfront discount of 4.5% to all categories.
• CPSE ETF has given reward of 8.55% since inception (as on 09.11.2018)

ABOUT MUTUAL FUND

Reliance Nippon Life Asset Management Ltd that manages Reliance Mutual Fund (RMF)assets has the mandate for managing CPSE ETF and has so far brought three tranches of CPSE ETF with maiden fund offer (NFO) in March 2014 and thereafter two successive Following Fund Offers (FFOs) in January 2017 and March 2017 is now coming out with CPSE ETF FFO3. This issue is opening on 27^th November 2018 for Anchor Investors and for other categories of investors it will remain open from 28^th November 2018 to 30^th November 2018.

CPSE ETF SCHEME AND ITS TRACK RECORDS

CPSE ETF is a passive investment fund that was created to help the government in its disinvestment program of divesting stake in select Central Public Sector Enterprises (CPSE) through Exchange Traded Funds (ETF). The fund invests in the Nifty CPSE Index stocks - that includes eleven PSU companies (Maharatnas, Navratnas, Miniratnas, Sector Leaders) selected on the basis of established track record, government holding, market capitalization, dividend history, sector representation, etc. - in the same proportion and weightage as of the index.

CPSE ETF NFO, FFO & FFO 2 received overwhelming response as its collection was Rs 4,363 Crs, Rs 13,705 Crs and Rs 10,083 Crs respectively, out of which Rs 1,363 Crs, Rs 7,705 and Rs 7,583 Crs respectively was refunded to investors due to the limited issue size of Rs 3,000, Rs 6000 Crs and Rs 2,500 Crs respectively. This time for CPSE ETF FFO3 the base limit is Rs 8000 cr. and the Fund has permission to keep oversubscription up to 75% of the base size i.e. Rs 6000 cr. thus making the overall fund offer of Rs 14000 cr. All these ETFs are listed on BSE and NSE.

As of October 31, 2018 composition of CPSE ETF is as under:

Source: www.relianceetf.com

This time, CPSE ETF FFO3 offer has changed product mix and is covering the power sector as well. While Container Corp, Engineers India and GAIL are out NTPC, SJVN, NBCC and NLC India are in.

The Further Fund Offer 3 in the CPSE ETF is part of the government's larger disinvestment program that was announced earlier by the Ministry of Finance. According to RMF 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.