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CPSE ETF: Further Fund Offer (FFO) 5 to Open on July 18

What is the CPSE ETF?

The Government of India used to divest its stake in Public Sector Enterprises by selling shares to investors via an Initial Public Offer (IPO) or the Offer for Sale (OFS) route. In 2014, the Ministry of Finance launched a new and innovative way to divest the government’s stake in certain CPSEs (Central Public Sector Enterprises) through floating an Exchange Traded Fund. CPSE ETF, an open-ended index exchange traded scheme listed on the exchange. is the vehicle for divestment of a part of Government’s stake in certain CPSEs


Back ground of CPSE ETF

CPSE ETF New Fund Offer (NFO) was launched in March 2014 and was oversubscribed, with a total collection of ₹4,363 crores. Given issue size limitations, ₹1,363 crores was refunded to investors.

The first Further Fund Offer (FFO) was launched in January 2017 and recorded a total collection of ₹13,705 crores. Of this, ₹7,705 crores was returned to investors.

FFO2 was launched in March 2017 and recorded total collections of ₹10,083 crores, of which ₹7,583 crores was refunded to investors.

FFO3 was launched in November 2018. The total collection reaching an unprecedented ₹31,203 crores, of which ₹14,203 crores had to be returned to investors.

FFO4 was launched in March 2019 and received an overwhelming response. It was oversubscribed six times and made a total collection of a whopping ₹30,464 crores. Of this, ₹20,464 crores was refunded to investors due to limited issue size of ₹10,000 crores.


Portfolio Composition

CPSE ETF portfolio has a good mix of sector allocation. Top 10 holdings of CPSE ETF portfolio as on Oct 31, 2019 was as below -

Sr. No. Constituents Industry Weightage (%)
1 Indian Oil Corporation Limited Petroleum Products 20.85%
2 Oil & Natural Gas Corporation Limited Oil 19.97%
3 Coal India Limited Minerals/Mining 19.53%
4 NTPC Limited Power 19.23%
5 Power Finance Corporation Limited Finance 7.13%
6 Bharat Electronics Limited Industrial Capital Goods 7.12%
7 Oil India Limited Oil 3.26%
8 NBCC (India) Limited Construction 1.30%
Equity Less Than 1% of Corpus 1.37%
Cash and Other Receivables 0.23%
Total 100.00%

Note - The allocation may or may not remain the same in the future

Source: AMFI, RMF internal

 

Scheme Performance

NAV as on Oct 31, 2019

CPSE ETF (CPSEETF)
NAV as on Oct 31, 2019
ParticularsCAGR%
1 Year3 Year5 YearSince Inception
CPSE ETF-0.03-1.00-1.086.65
B: Nifty CPSE TRI0.36-0.85-1.024.35
AB: Nifty 50 TRI15.9312.668.7612.25
Value of `10000 Invested
CPSE ETF 9,997 9,702 9,470 14,342
B: Nifty CPSE TRI 10,036 9,748 9,499 12,691
AB: Nifty 50 TRI 11,593 14,313 15,218 19,094

Performance as on Oct 31, 2019

B: Benchmark, AB: Additional Benchmark, TRI: Total Return Index

TRI - Total Returns Index reflects the returns on the index arising from (a) constituent stock price movements and (b) dividend receipts from constituent index stocks, thereby showing a true picture of returns.

For Exchange Traded Funds of Nippon India Mutual Fund, performance is provided at Scheme level using Dividend Reinvestment NAV’s, since there are no separate plan/option under such Schemes.

Period for which scheme’s performance has been provided is computed basis last day of the month-end preceding the date of advertisement.

Past performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other investment. Performance of the schemes (wherever provided) are calculated basis CAGR for the past 1 year, 3 years, 5 years and Since Inception. Dividends (if any) are assumed to be reinvested at the prevailing NAV. Performance of the scheme would be Net of Dividend distribution tax, if any. Face value of scheme is Rs.10/- per unit. In case, the start/end date of the concerned period is non-business day (NBD), the NAV of the previous date is considered for computation of returns.


Performance of other schemes managed by Fund Manager

PERFORMANCE OF OTHER OPEN ENDEDSCHEMES MANAGED BY THE SAME FUND MANAGERS AS ON Oct 31, 2019
Scheme Name/sCAGR%
1 Year Return3 Year Return5 Year Return
SchemeBenchmarkSchemeBenchmarkScheme Benchmark
Nippon India ETF Junior BeES9.009.367.888.4410.7811.58
Nippon India ETF Bank BeES19.8520.0615.7015.9412.4112.75
Nippon India ETF Nifty BeES15.9215.9312.5512.668.558.76

Vishal Jain has been managing Nippon India ETF Bank BeES since Nov 2018

Vishal Jain has been managing Nippon India ETF Nifty BeES since Nov 2018

Vishal Jain has been managing Nippon India ETF Junior BeES since Nov 2018


Note:

  • Vishal Jain manages 4 open-ended schemes of Nippon India Mutual Fund
  • In case the number of schemes managed by a fund manager is more than six, in the performance data of other schemes, the top 3 and bottom 3 schemes managed by fund manager has been provided herein are on the basis of 1 Year CAGR returns
  • Period for which scheme’s performance has been provided is computed basis last day of the month-end preceding the date of advertisement
  • Different schemes shall have a different expense structure The above schemes do not offer any Plans/Options. The performance details are provided at Scheme level using Dividend Reinvestment NAV’s.

Past performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other Investment. Dividends (if any) are assumed to be reinvested at the prevailing NAV. Performance of dividend option would be Net of Dividend distribution tax, if any. Face value of Nippon India ETF Junior BeES is Rs.1.25/- per unit. Face value of other schemes is Rs.10/- per unit. In case, the start/end date of the concerned period is non-business day (NBD), the NAV of the previous date is considered for computation of returns.


Valuations 

At current valuations, the Nifty CPSE Index makes a case for investors with a long-term investment horizon. As on 16th July 2019, the price-earning (PE) ratio for Nifty 50 Index is 28.51, whereas for Nifty CPSE Index is 8.84. This indicates a PE discount of 68.99% for Nifty CPSE Index against Nifty 50 Index. Similarly, the price to book value (PB) ratio for Nifty CPSE Index of 1.52 times is at a 58.24% discount to Nifty 50 Index PB ratio of 3.64 times. (Source: NSE)


Forthcoming FFO

After the success of earlier FFOs, i.e. FFO, FFO 2, FFO 3 and FFO 4, the forthcoming FFO 5 opens and closes on 18th July for Anchor Investors and on 19th July for Non-Anchor Investors.

The base size is ₹8,000 crores, plus additional size is to be decided by the Government of India (GOI). FFO 5 offers a 3% discount* to all categories of investors for the shares purchased from GOI. There is no discount on the purchase of index constituents from the open market.

The proposed category-wise allocation of CPSE ETF FFO 5 is 30% to Anchor Investors and 70% to Non Anchor Investors. In case of undersubscription from Retail Individual Investors and QIB (Retirement Funds), the balance portion of Non Anchor Investor category will be to be allocated to QIB (Other than Retirement Funds) /NIIs.

* Discount is on the FFO5 Reference Market Price. FFO 5 Reference market price is determined on the average of full day volume weighted average price on the NSE during the Non Anchor Investor FFO 5 period (inclusive of Non Anchor Investor FFO 5 period as well as close date) for each of the index constituents of the Nifty CPSE Index.

Post closure of FFO 5, THE Post closure of FFO 5, the Scheme will purchase the underlying Index constituents from GOI. Discount will be on shares to be offered by the Government of India. In the event an index constituent is purchased fully or partially from open market to meet the Maximum Amount to be Raised during FFO 5, no discount will be offered on such purchase of index constituent from open market.


Why Investors Choose CPSE ETF?

To gain exposure to India’s growth story through investments in large CPSE stocks at relatively better valuations.

To achieve portfolio diversification through investment in blue-chip Maharatna, Navaratna and Miniratna CPSE stocks, most of which are sector leaders and have a strong near-monopoly position. To take advantage of the FFO 5 discount, available to all investor categories. To enjoy flexibility of trading on a real time basis. To benefit from its significantly low expense ratio. To diversify exposure across various public sector companies with a single investment.


Conclusion

CPSE ETF FFO 5 maybe considered by investors looking for the value proposition of CPSEs over the long term through passive management along with a low expense ratio.


Nippon India ETF Bank BeES​​​

This product is suitable for investors who are seeking*

  • long-term capital appreciation.
  • investment in securities covered by Nifty Bank Index.

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

 
CPSE ETF

This product is suitable for investors who are seeking*

  • long-term capital appreciation.
  • investment in securities covered by Nifty CPSE Index.

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

 
Nippon India ETF Junior BeES ​​​​​​

This product is suitable for investors who are seeking*

  • long-term capital appreciation.
  • investment in securities covered by Nifty Next 50 Index.

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

 
Nippon India ETF Nifty BeES ​​​​​​​

This product is suitable for investors who are seeking*

  • long-term capital appreciation.
  • investment in securities covered by Nifty 50 Index.

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

 

Disclaimers

Scheme Risk Factors: Risk relating to CPSE Securities - Since the CPSE companies are substantially owned by the GOI, the GOI may take actions with respect to the CPSE sector that may not be in the best interests of Unit holders. There can be no assurance that such incidents would not result in a fall in price of the underlying securities constituting the Nifty CPSE Index and correspondingly the NAV of the Scheme. Further trading volumes and settlement periods may restrict liquidity in equity and debt investments. Investment in Debt is subject to price, credit, and interest rate risk. The NAV of the Scheme may be affected, inter alia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. The NAV may also be subjected to risk associated with tracking error, investment in derivatives or script lending as may be permissible by the Scheme Information Document (SID). Past performance may or may not be sustained in future. For further details please refer SID.

BSE Disclaimer: It is to be distinctly understood that the permission given by BSE Ltd. should not in any ways be deemed or construed that the SID has been cleared or approved by BSE Ltd. nor does it certify the correctness or completeness of any of the contents of the SID. The investors are advised to refer to the SID for the full text of the Disclaimer clause of the BSE Ltd.

NSE Disclaimer: It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the Draft Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of the Disclaimer Clause of NSE.

 

Disclaimer by Index Provider

Performance of the Nifty CPSE Index will have a direct bearing on the performance of the Scheme. In the event that Nifty CPSE Index is dissolved or is withdrawn by the index provider NSE Indices Limited (formerly known as India Index Services & Products Limited (“IISL”)) or in case the License Agreement executed with index provider for licensing of Nifty CPSE Index is terminated, subject to necessary approvals, including prior written approval from the Department of Investment and Public Asset Management(DIPAM), the Trustee reserves a right to modify the Scheme so as to track a different and suitable index and the procedure stipulated in the SEBI Regulations shall be complied with.

  • The product i.e. the Scheme is not sponsored, endorsed, sold or promoted by NSE Indices Limited. NSE Indices Limited does not make any representation or warranty, express or implied to the owners of the product or any member of the public regarding the advisability of investing in Securities generally or in the product particularly or the ability of Nifty CPSE Index to track general stock market performance in India. The relationship of NSE Indices Limited to Reliance Nippon Life Asset Management Limited (RNAM) is only in respect of the licensing of certain trademarks and trade-names of their index, which is determined, composed and calculated by NSE Indices Limited without regard to RNAM or any product. NSE Indices Limited does not have any obligation to take the needs of RNAM or the Unit holders of the product into consideration in determining, composing or calculating Nifty CPSE Index. NSE Indices Limited is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the product to be issued or in the determination or calculation of the equation by which the product are to be converted into cash. NSE Indices Limited has no obligation or liability in connection with the administration or marketing or trading of the product.
  • NSE Indices Limited does not guarantee the accuracy and/or the completeness of the Nifty CPSE Index or any data included therein and they shall have no liability for any errors, omissions, or interruptions therein. NSE Indices Limited makes no warranty, express or implied, as to the results to be obtained by the RNAM, Unit holders of the product or any other persons or entity from the use of the Nifty CPSE Index or any data included therein. NSE Indices Limited makes no express or implied warranties and expressly disclaim all warranties of merchantability or fitness for a particular purpose or use with respect to the index or any data included therein. Without limiting any of the foregoing, NSE Indices Limited expressly disclaims any and all liability for any damages or losses arising out of or related to the product, including any and all direct, special, punitive, indirect or consequential damages (including lost profits), even if notified of the possibility of such damages.

Disclaimers

  • The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers.. Some of the statements & assertions contained in these materials may reflect RNAM’s views or opinions, which in turn may have been formed on the basis of such data or information.
  • Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.


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