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Goldman Sachs AMC launches first CPSE ETF

Capital Market/ 18:18 , Mar 18, 2014

As part of its disinvestment programme, the Government of India aims to raise Rs 3000 core through the scheme

Goldman Sachs AMC has launched first CPSE ETF, an open-ended Index Exchange Traded Scheme (Rajiv Gandhi Equity Savings Scheme (RGESS) Qualified Scheme). The scheme will offer units of Rs 10/- each for cash (on allotment, the value of each Unit would be approximately 1/100th of the value of CPSE Index) to be issued at a premium, if any, approximately equal to the difference between face value and allotment price during the New Fund Offer (NFO) and at NAV based prices during the Ongoing Offer.

The NFO period for anchor investor opens and closes on 18 March 2014 and for non-anchor investor it opens on 19 March and closes on 21 March 2014. Scheme will re-open for continuous Subscription and Redemption on or before 11 April 2014.

As part of its disinvestment programme, the Government of India (GOI), through its Cabinet Committee on Economic Affairs (CCEA) on May 2, 2013 approved the setting up of a central public sector enterprise exchange traded fund (ETF) comprising equity shares of central public sector enterprises (CPSE), which would be launched as a CPSE ETF mutual fund scheme.

The Department of Disinvestment, Ministry of Finance, Government of India (Department of Disinvestment) appointed Goldman Sachs Asset Management (India) Private Limited (the AMC) to launch and manage the CPSE ETF in accordance with SEBI Regulations.

The investment objective of the Scheme is to provide returns that, before expenses, closely correspond to the total returns of the Securities as represented by the CPSE Index, by investing in the Securities which are constituents of the CPSE Index in the same proportion as in the Index.

Benchmark Index-CPSE Index

CPSE Index is constructed in order to facilitate Government of India's initiative to dis-invest some of its stake in selected CPSEs. The government opted for ETF route for disinvestment. The ETF shall track the performance of the CPSE index. The index values are to be calculated on free float market capitalization methodology. The index has base date of 01-Jan-2009 and base value of 1000. Weights of index constituent shall be re-aligned (i.e. capped at 25%) every quarter effective 2nd Monday of February, May, August and November.

Index Composition as on 28 February 2014:

Company Name Weightage (%)
Oil & Natural Gas Corporation Ltd. 26.43
GAIL (India) Ltd. 18.97
Coal India Ltd. 17.55
Rural Electrification Corporation Ltd. 7.23
Oil India Ltd. 7.07
Indian Oil Corporation Ltd. 6.81
Power Finance Corporation Ltd. 6.5
Container Corporation of India Ltd. 6.26
Bharat Electronics Ltd. 2.05
Engineers India Ltd. 1.13

Maximum Amount to be Raised (if any)-Rs 3000 crores, subject to maximum of 3% of the paid up share capital of each of the constituents of the CPSE Index.

Minimum Target Amount-The Scheme seeks to collect a minimum target amount of ₹ 100 Crores during the NFO Period.

Load structure: Nil

Category of Investors (only during the NFO period):

-Retail Individual Investors

-Qualified Institutional Buyer or QIB

-Non Institutional Investors

-Anchor Investors

Option: Growth

Asset Allocation: The scheme shall invest 95%-100% in securities covered by CPSE Index. The scheme shall also invest up to 5% in Money Market Instruments (with maturity not exceeding 91 days), including CBLO, cash & cash equivalents.

Minimum Application Amount:

For Non Anchor Investors:

Retail Individual Investors can invest in the Scheme with a minimum investment amount of Rs 5,000/- (Rupees Five Thousand only) and in multiples of Rs 1/- (Rupee One) thereafter.

Non Institutional Investors / Qualified Institutional Buyer (other than Anchor Investors) can invest in the Scheme with a minimum investment amount of Rs 2, 00,001/- (Rupees Two Lakhs and One only) and in multiples of Rs 1/- (Rupee One) thereafter.

For Anchor Investor:

Investors can invest in the Scheme with a minimum investment amount of Rs 10 Crores (Rupees Ten Crores Only) and in multiples of Rs 1/- (Rupee One) thereafter.

Anchor Investor Subscription Amount:

Anchor Investors shall pay a margin of at least 25% (Twenty Five percent) of the Subscription amount during the Anchor Investor NFO period, with the balance to be paid on or before the closure of the Non Anchor Investor NFO Period. If the Anchor Investor does not pay the balance amount before the closure of the Non Anchor Investor NFO Period, then the margin amount paid by the Anchor Investor shall be forfeited and credited to the Scheme.

Discount Offered by GOI to CPSE ETF:

A discount of 5 (five) % on the Reference Market Price of the underlying CPSE Index shares shall be offered to CPSE ETF by GOI for buying the underlying CPSE Index shares from GOI. The purchase from GOI would be out of the NFO proceeds received by CPSE ETF towards Subscription of its Units by all categories of Investors. Investors should note that the above mentioned discount on the 'Reference Market Price' may not be a discount to the closing market price of the underlying shares of CPSE Index on the Allotment Date.

Scheme eligible for RGESS: As per Section 80CCG of the Income-tax Act, 1961, investments made by a Retail Individual Investor in this Scheme will qualify for a 50% deduction of the actual amount invested from the taxable income of the financial year. The maximum investment permissible for claiming deduction in a financial year is ₹ 50,000.

The Unit holders who wish to avail of the tax deduction under the Scheme shall be subject to lock-in-periods viz. fixed lock-in and flexible lock-in as specified under the notified RGESS. The fixed lock-in-period shall commence from the date of purchase of such Units in the relevant financial year and end on the 31st day of March of the year immediately following the relevant financial year.

The flexible lock-in period will be of two years beginning immediately after the end of the fixed lock-in period.

 



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