NEW DELHI: Over a dozen CPSEs have evinced interest in raising funds through finance ministry's maiden debt exchange-traded fund (ETF) to meet part of their capital expenditure needs next fiscal, an official said.
To start with, finance ministry will provide a platform for only 'AAA' and 'AA' rated Central Public Sector Enterprises (CPSEs) to raise funds by way of bond issuance using debt ETF route.
"As many as 10-15 CPSEs have shown interest to try debt ETF route for fund raising in next fiscal.
These would be 'AAA' or AA' rated companies.
The bonds would have varying tenure of two, three or five years," an official told .
Finance Minister Arun Jaitley had in 2018-19 budget announced coming out with a debt ETF, following success of equity ETFs like CPSE ETF and Bharat-22 ETF.
To give effect to this, Department of Investment and Public Asset Management (DIPAM) is in process of appointing mutual funds or asset management companies (AMCs) for creating, managing and launching a debt ETF.
While inviting bids from AMCs, finance ministry has said public sector banks (PSBs) can also raise funds through debt ETF route.
The official, however, said that PSBs would not initially raise funds using this route.
The debt ETF would help these state-run companies meet capex and business needs by leveraging their aggregate strength.
This will bring enhanced liquidity, investors base and transparency of participating CPSEs.
"The CPSEs are also interested to see if fund raising through debt ETF would lower their borrowing cost.
The AMC will decide which CPSEs should be clubbed in ETF for lowering cost," official added.
In India, corporate bond market constitutes a relatively small size of around 13 per cent in terms of GDP as compared to government bond market, which is around 30.4 per cent in terms of GDP.
The debt market consists of G-Sec market and corporate debt market.
The G-Secs accounts for 79 per cent of total amount of outstanding bonds in India.
JD SHW MKJ