Mutual Funds
Government invites proposals from mutual funds for PSU ETF

MFs which are registered with SEBI and have at least five years experience would be eligible for setting up PSU ETFs

New Delhi: Moving ahead with its proposal to set up an exchange traded fund for public sector undertakings (PSUs), the Indian government has invited proposals from mutual funds (MFs) having equity assets of over Rs2,500 crore, reports PTI.


The Department of Disinvestment (DoD) said the mutual funds meeting the prescribed eligibility criteria can submit by 24th January the proposals for setting up the exchange traded fund (ETF).


The MFs which are registered with Securities and Exchange Board of India (SEBI) and have at least five years experience would be eligible for setting up ETFs, the department said, adding the fund houses would be responsible for conducting roadshows for the share sale through ETF.


The average equity/ETF assets under management of the MFs should not be less than Rs2,500 crore at the end of July-September quarter, the DoD said.


The proposed ETF, which would be based on a basket of shares of 20 profit-making CPSEs, is aimed at obtain better price for equity of state-owned companies during the disinvestment process.


The 20 companies would include blue chip PSUs like ONGC, Indian Oil, Power Finance Corporation, NTPC, NMDC and BHEL.


Last year, government had appointed ICICI Securities as the advisor to set up the ETF. It will select and appoint one asset management company (AMC) with experience and expertise in the launch and management of equity MFs/ETF schemes.


The proposed PSU ETF will serve as an additional mechanism for the government to monetise its shareholdings in those CPSEs that eventually form part of the ETF basket.


"The CPSE ETF could be launched as a new fund offer (NFO) followed by further tranches and the government may provide appropriate discount for different investors," the DoD said while inviting bids from MFs.


The PSU ETF, which is being planned on the lines of the Hong Kong Tracker Fund, would help government speed up its disinvestment plan.


The DoD is in the process of floating a Cabinet note seeking comments of Ministries on setting up of ETF.


An ETF tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.


ETFs were introduced in India in 2001. Currently, there are 33 ETFs having AUM of close to Rs11,500 crore and held by 6.2 lakh investors. Gold ETFs dominate ETF market in India.


Globally, ETFs have been growing at a rapid pace with an annual growth rate of over 34% in the last decade, with Assets Under Management of $1.5 trillion at present.


LIC Housing plans to raise up to Rs1,000 crore through ECB route

LIC HF has formed a committee comprising senior officials which is in touch with the apex bank on the ECB issue

Hyderabad: LIC Housing Finance Ltd, promoted by state-run insurance giant Life Insurance Corp of India (LIC), is mulling raising Rs700-Rs1,000 crore through external commercial borrowings (ECB), reports PTI quoting its chief executive VK Sharma.


Last month, the Reserve Bank of India (RBI) allowed real estate developers and housing finance companies to raise up to $1 billion through external commercial borrowings (ECBs) in the current fiscal to promote low-cost housing projects.


Sharma said a committee comprising senior officials of the company has been formed which is in touch with the apex bank on the ECB issue.


"We expect that we will be in that segment which has been permitted by the RBI. We expect that we will be raising somewhere around Rs 700-Rs1,000 crore. We will apply for that," Sharma said on the sidelines of a two-day property exhibition.


ECBs are considered attractive as cost of raising the loan overseas is lower than that of domestic borrowings. Besides, they provide an additional avenue to access large amount of funds from global financial markets.


To a query on when the company would raise ECBs, Sharma said: "I cannot comment on that. Board resolution is there in place. We have created a committee at company level and they are in touch with RBI."


He said LIC Housing Finance (LICHFL) is expected to complete the institutional placement offer by fiscal end.


The qualified institutional placement (QIP) was delayed due to variety of reasons, including volatility in the markets, he added.


Though he did not mention the exact amount being raised through QIP, a senior official earlier told PTI it is hoping to raise up to Rs1,200 crore through the proposed issue of new shares.


LIC, which is promoter of LICHFL, currently holds 40.31% stake in the company. While institutional investors, both foreign and domestic together, are holding 41.47% shares, others hold 18.22% shares.


The merchant bankers appointed for the issue include Nomura, Kotak Securities, HSBC, Citigroup and Avendus Securities, according to the official said.


Parent LIC's stake in the company currently stands at 40.31%, which will come down to the 36.54% level after the issue.


LICHFL, which is now charging 10.25% interest on home loans, will wait for Reserve Bank of India's policy review slated for January 29 before taking a decision on revising interest rates, Sharma said.


Last year, the company disbursed Rs20,000 crore loans and is targeting Rs25,000 crore this year, he added.


General insurance industry may grow by 20% annually

The penetration of the general insurance in India stands at around 0.7%, lower than the global average of 1.5 to 4%

Mumbai: The Indian general insurance industry is likely to grow by around 20% per annum in the coming years because of increasing penetration, reports PTI quoting a top official of New India Assurance.


"Despite slowdown in economy, the general insurance industry has grown by around 20% in the recent past. We hope the industry will see similar growth in the coming years," Chairman and Managing Director of New India Assurance G Srinivasan said.


The penetration of the general insurance in India stands at around 0.7%, lower than the global average of 1.5 to 4%.


Recently, the finance ministry had asked the industry to come up with proposals for increasing the penetration.


As to the total premium, Srinivasan said it should go up by at least four times in the next 10 years.


Presently, the total premium of the industry is around Rs60,000 crore, with a growth of around 20% per annum.


About major challenges before the industry, Srinivasan said it will have to reduce the underwriting losses.


New India Assurance, the largest general insurer of the country, crossed Rs10,000 crore mark in premium collection in the last financial year and aims to touch a global premium of Rs12,000 crore in the current financial year.


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