CPSE ETF, Maharatna, Navratna and  Miniratna Companies

Maharatna and Navratna  have once again become the buzz words in India. Government of India has decided to sell stakes of four Maharatna  and six Navratna companies through CPSE ETF route. This is proposed by Government as part of its disinvestment plan in public sector units (PSU). 

Mahartna, Navrtna, Miniratna,  Companies, CPSE ETF, NIFTY, NIFTY CPSE Index, Reliance Nipppon, Mutual Fund, ETF

What are Mahartna, Navrtna and Miniratna Companies?

Navratna was the title given by the Government of India in 1997 to 9 Public Sector Enterprises (PSEs). These public sector enterprises were selected based on their comparative advantages.  The title s gave them greater autonomy to compete in the global market. 
PSU companies are divided into three categories:
·         Maharatna
·         Navratna
·         Miniratna ( Category 1 and Category 2)

Learn more by clicking  What is meant by Navratna,Miniratna and Maharatna Companies?


What are Mutual Funds and Exchange Traded Funds (ETF)?

Mutual Fund is an investment scheme for retail investors to invest in equity market. Mutual funds mobilise funds from individual investors, creates a pool and invest in equity market on behalf of individual investors at a nominal fee. Investors are allotted units of mutual fund in proportion to their investments. 

There are different types of mutual fund schemes. The performance of each scheme is measured in relation to an index. Exchange Traded Fund (ETF) is a mutual fund scheme, whose portfolio contains the same basket of stocks in same proportion as in the case of  NIFTY CPSE Index. 

Which are the stocks that constitute the NIFTY CPSE ETF?

The NIFTY CPSE ETF contains shares of four Maharatna companies and six Navratna companies in the proportion as shown below:

Maharatna Companies

Weight ( %)

Oil & Natural Gas Corporation Limited

24.4

Coal India Limited

20.6

Indian Oil Corporation Limited

18

GAIL (India) Limited

11.2

Navratna Companies

 

Power Finance Corporation Limited

5.6

Rural Electrification Corporation Limited

5.2

Container Corporation of India Limited

5

Bharat Electronics Limited

4.3

Oil India Limited

3.4

Engineers India Limited

2.3

The performance of the ETF is measured in relation to the performance of NIFTY CPSE Index and also that of the stock market. 

What is CPSE ETF?

Disinvestment means diluting the government holding in the public sector companies. Government dilutes its shareholding by allowing private investors to own shares of the companies. This makes the companies more accountable and compels to improve performance. 

CPSE Exchange traded fund was a scheme initially floated in March 2014 as part of disinvestment in the abovementioned companies. The performance of the ETF was good and hence Government has decided to disinvest another tranche of ownership. The fund will be open between 18th January, 2017 and 20th January 2017. The scheme expects to receive Rs. 5000 – 6000 cr during the period. It is managed by Reliance Nippon Life AMC.
 

What is the attraction of CPSE ETF?

•    It is a good opportunity for an investor to claim ownership in top performing 10 public sector units. 
•    CPSE Basket contains shares, the valuation of which are reasonable and returns are good in comparison to many private companies.
•    Investors who first invested in 2014 have as of now made a return of 54% on their buy price. 
•    During the offer, the CPSE ETF is available at a 5% discount to prevailing market price. 


If an investor fails to invest during the above period, he can still purchase the ETF from stock exchange on the prevailing price. It may be noted that since the investment is in shares, the investment carry all risks associated with equity market. 

What is meant by Navratna,Miniratna and Maharatna Companies?

Maharatna,Navratna and Miniratna Companies- Updated List

Summary
Article Name
CPSE ETF, Maharatna, Navratna and  Miniratna Companies
Description
Government of India has decided to sell stakes of four Maharatna and six Navratna companies through CPSE ETF route.
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attemptNwin.com

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