By Samie Modak
ICICI Securities (I-Sec), the broking and investment banking arm of India's largest private sector lender ICICI Bank, has won the mandate to advise the government on the course to be taken in floating an exchange traded fund (ETF) of public sector undertakings (PSUs).
The investment banking arm of the country's largest private lender won the mandate trumping Citibank, SBI Capital Markets and Taiwan-based Yuanta Funds, which too, had made presentations on Thursday. The advisor was selected after a two-stage bidding process that included financial and technical bidding.
I-Sec will now advise the department of disinvestment on the size, composition and structure of the fund as well as other issues involved in launching the ETF. "Appointment of the advisor was the first stage of setting up the ETF. In the second stage, we will have to advice the government on shortlisting AMCs, market makers and deciding the timeline for launching the ETF," said Vineet Arora, executive vice president, ICICI Securities. I-Sec's sister concern ICICI Prudential AMC is one of the largest fund houses in the country managing around Rs 76,387 crore worth of assets as on September 2012.
The PSU ETF is seen as one of the different modes the government is planning to use in achieving the Rs 30,000-crore divestment target this fiscal. The government is yet to raise any money with just five months to go for the financial year to end.
"ETFs, which globally have proved to be successful instruments, will provide one more avenue to the government for disinvestment," said Arora.
The ETF will also help the government pare its holding in PSUs. The Centre has to bring down its shareholding in over a dozen PSUs to below 90 per cent before August 2013 to comply with the public shareholding norms.
Earlier, steep eligibility conditions had kept fund houses and investment banks from bidding for the mandate to advise the PSU ETF. One such condition was that the bidders should have advised or launched an equity ETF, MF or done a similar transaction during April 1, 2009 to June 30, 2012 of the size of Rs 1,000 crore or more. However, later the government revised the norms to include entities that launched schemes that later grew to Rs 1,000 crore.