PSU ETF’S: A NEW INVESTMENT VEHICLE

PSU ETFS LAUNCHED, RETAIL INVESTORS TO GET LOYALTY
BONUS OF 1 UNIT ON EVERY 15 UNITS HELD
In a bid to raise `3000 crore in the current fiscal via disinvestment, the government on March 18 launched the much awaited Public Sector Undertaking Exchange Traded Fund (ETF). This ETF will hold shares of 10 major PSUs and would be an open ended scheme. Prominent companies that will feature in this fund include Coal India, ONGC,
GAIL and Indian Oil.

As an inaugural discount, all investor will get an upfront discount of five per cent whereas retail investor will get an additional 6.66 per cent discount if they remain invested for a lock-in of one year. Anchor investors had invested Rs 10 crore into the ETF to begin with and the fund is now opened up for non-anchor and retail investors. It is scheduled to close on March 21 for non anchor investors. Retail investor can invest a minimum of Rs 5000 into the fund and this fund will follow the CPSE index as the benchmark underlying index.

As approved by the Cabinet Committee of Economic Affairs (CCEA), the government is divesting a maximum of three per cent of its stake in each of the company into the ETF and the fund will be managed by Goldman Sachs Asset Management company. In the current mix the ETF has a majority of energy company stocks in it. The total weight of these stocks in the fund stands at 60 per cent with ONGC having a maximum  weightage of 26.72 per cent, followed by Gail and Coal India at 18.48 per cent and 17.75 per cent respectively.

The underlying stock index has a start date of January 1 2009 and the companies that form a part of this ETF have been chosen on the criteria of stock price performance and consistent dividend payment. All these 10 companies are profit making and have a market capitalization of more than Rs 1000 crore.

Other companies in the ETF include Power Finance Corporation, Rural Electrification Corporation, Concor, Bharat Electronics and EIL. As far as retail investors are concerned, they will receive a loyalty bonus of one unit for every 15 units held if they remain invested for more than a year. Even if the ETF remains flat, retail investors will earn a return of 11 per cent via bonus and discounts.

DIPP TO PREPARE BRIEF FOR NEW GOVERNMENT ON FDI INVESTMENT

The Cabinet Secretary has directed the Department of Industrial Policy and Promotion (DIPP) to prepare an important brief for the next government highlighting the key focus areas relating to foreign investment in the country. DIPP is the crucial arm of Commerce Ministry that deals with foreign fund flows into the country. The idea behind this move is to generate a status report for the next government that will assume office in May 2014 about the developments and issues relating to foreign investment so that the next government can straightaway take steps in this direction on various policy matters. 

As per this direction the DIPP will make out a report on matters like national manufacturing policy, foreign direct investment, reforms in FDI investment in various sectors, etc. Other departments will also provide their inputs into this report to make it more comprehensive.

BENGAL CHEMIST AND DRUGGIST ASSOCIATION PENALIZED BY CCI
The Bengal Chemist and Druggist Association (BCDA) have been penalized by the Competition Commission of India (CCI) for anti-competitive practices. A penalty of Rs18.38 crore has been imposed on the association. West Bengal’s Director of Drugs, Dr Chintamoni Gosh had issued a suo moto order against the association, where he alleged that BCDA is guilty of issuing anti-competitive circulars to retailers for not giving any discount to  consumers.

The CCI after considering the matter directed the Director General (DG) to carry out an investigation into the matter. Investigations resulted in the CCI coming to a conclusion that activities of BCDA to direct its members to sell drugs only at their MRP is a “palpable anti-competitive conduct” which cannot be justified on the ground that most of the members of the BCDA, would be ruined if competitive forces are allowed to operate in the market.

Accordingly it has been concluded that activities of BCDA are in conflict with the objects of the competition law and CCI hence has decided to impose a penalty on the BCDA and directed the association and its office bearers to desist from indulging in anti competitive
practices.

EGOM TO DECIDE ON CROP DAMAGE RELIEF
Th e Empowered Group of  Ministers (EGoM) headed by agriculture minister Sharad Pawar will decide about the crop damage relief package for farmers of four states where corps were damaged by hailstorms recently. Maharashtra, Madhya Pradesh, Rajasthan and Karnataka  have asked for central assistance for their farmers as crops in these states have been badly damaged due to untimely rains, hailstorms and wind storms. 

This is the first meeting of EGoM and the extent of central assistance to the farmers of these states will be discussed in the meeting. The concerned states are pushing their case as a national calamity as huge crop has vanished following the bad weather. However, as the election code of conduct is in place, it will be interesting to see how the election commission will react to any relief, if announced by the EGoM.

The Government is hoping to give away relief from National Disaster Response Fund but
again it has to be cleared by the Election Commission.