Reliance Mutual Fund Announces the Launch of FFO3

Mumbai, November 20: Reliance Mutual Fund (RMF) announced the launch of Further Fund Offer 3 (FFO3) of its Central Public Sector Enterprises‑Exchange Traded Fund (CPSE ETF). The FFO3 is part of the Government of India’s (GoI) overall disinvestment program, announced earlier by the Department of Investment and Public Asset Management (DIPAM), Ministry of Finance (MoF), using the ETF route.

RMF proposes to raise up to Rs 8,000 crore  (US$ 1.12 Billion) in FFO3 as “Initial Amount” plus an “Additional Amount” (if any) based on instructions of GoI.

“The FFO3 in the CPSE ETF is part of the government’s larger disinvestment program that was announced earlier by the MoF. We feel confident that the timing of the issue will help investors benefit from their exposure in a diversified basket like CPSE ETF that includes a list of distinguished PSUs who are leaders in their respective sectors. It offers a compelling opportunity for investors, especially retail and retirement funds, to invest in the India growth story at an attractive valuation, low expense and embedded discounts”, said Sundeep Sikka, ED and CEO, Reliance Nippon Life Asset Management.

The FFO3 is open for all categories of investors including anchor investors, retail investors, Retirement Funds, Qualified Institutional Buyers, Non-institutional investors and Foreign Portfolio Investor.

As part of the FFO3, an upfront discount of 4.5% is being offered to all categories of investors and the minimum subscription for all the categories of investors is stipulated at Rs 5,000.

The dividend yield of Nifty CPSE Index is approximately 5.25% (Source NSE: Data as of October 31, 2018), further adding to the overall merit of investing in this ETF, RMF said in a release. In addition, CPSE ETF has a very low expense ratio of 0.95 bps, it added.

The FFO3 issue will open and close for anchor investors on November 27, and for non- anchor investors on November 28, 2018 and close on November 30, 2018.

“We would like to reach out to retirement funds to invest in FFO3 and consider this as an opportunity to secure their funds and benefit from the growth of these PSUs—some of which are Navratnas, Maharatnas, Miniratnas and are either sector leaders or near monopolies in their respective sectors”, said Sikka.

DIPAM has appointed ICICI Securities Limited as the advisor for the FFO3.

CPSE ETF is a passive investment fund that was created to help the government in its disinvestment program of divesting stake in select CPSEs through ETF. The fund invests in the Nifty CPSE Index stocks—that includes 11 PSU companies selected on the basis of established track record, government holding, market capitalisation, dividend history and sector representation, in the same proportion and weightage as of the index.

Post the successful New Fund Offer (NFO) in 2014, GoI decided to launch two more tranches (FFOs) in January and March 2017, which evinced a very good response from investors.

CPSE ETF NFO, FFO and FFO 2 received overwhelming response as it collected   Rs.4,363 crore, Rs.13,705 crore and Rs.10,083 crore respectively. The issue size of these offerings were limited to the tune of  Rs.3,000 crore, Rs.6000 crore, and Rs.2,500 crore respectively, and hence Rs.1,363 crore, Rs.7,705 crore and Rs.7,583 crore respectively were refunded to investors.

Composition of CPSE ETF (as of October 31, 2018):

Industry Representation (%) - As of October 31, 2018: