Government shareholding in three blue chips, which are part of the CPSE ETF -- NTPC, BEL and PowerGrid -- has reached the 51 percent threshold, thus making further stake dilution impossible, exchange data shows.
The government may have to replace these stocks with other blue chips where the government shareholding is comfortably above 51 percent threshold.
Sources indicate this rebalancing of the basket is necessary to enable the government to offer another tranche of the CPSE ETF to investors.
However, the government at the moment is ruling out further offers of the Bharat 22 ETF. Sources tell CNBCTV18, ”Bharat 22 is completely exhausted so no question .”
Against three blue chips to be replaced in the CPSE ETF, possibly more than five stocks will need to be replaced in the Bharat 22 ETF.
Apart from BEL and PowerGrid, which are common to both the baskets, government stake has hit 51 percent in IOC, exhausted in L&T, and BPCL is part of the strategic divestment programme in REC, where government shareholding is at 52.63 percent, to name a few.
Also, among the SUUTI stocks, after exiting L&T the government is left with only Axis Bank with under 5 percent stake. Whereas it’s committed to holding on to the 8 percent odd shareholding in ITC. If the government decides to sell Axis Bank shareholding as an offer for sale (OFS) then the SUUTI portfolio in Bharat 22 will be further reduced.
Both CPSE and the Bharat 22 equity ETF offerings by the government had received a strong response from investors.
So much so, the equity ETF offerings have become the mainstay of the government’s disinvestment programme, particularly in the absence of big-ticket OFS as CPSE stock prices have been less than encouraging to undertake a large or a number of such transactions.
Hence large government divestments through ETFs have emerged as a popular option for policymakers.
In FY19, the government met over 53 percent of its 84,000 crore divestment receipts via ETFs. While in FY20, 59 percent of the 52,000 crore divestment revenue was met by ETF offerings.
After such massive divestments through the ETFs, it’s natural that stake in a number of blue chips has fallen close to the 51 percent threshold, necessitating a deep churn in the ETF portfolios for further fund offers.