A new fund – Bharat 22 ETF – has boosted the government’s disinvestment programme. Who were the legal advisers and what was their role? Rebecca Abraham reports

The “government has no business to be in business”, has been a refrain often heard from Prime Minister Narendra Modi. This mantra was recently repeated by Amitabh Kant, a former bureaucrat who wields substantial clout as the head of Niti Aayog, a policy think-tank of the government, who advocated that the government should also hand over schools, colleges and prisons to the private sector.

Be that as it may, the central government’s disinvestment programme focuses on the roughly 235 public sector enterprises that it controls. The vehicle of choice for disinvestment – as mentioned in the finance minister’s budget speech earlier this year – continues to be the exchange traded fund (ETF).


The government first used an ETF to disinvest in March 2014. Dubbed the CPSE (Central Public Sector Enterprises) ETF, it netted the government nearly ₹115 billion (US$ 1.9 billion).

When the government’s second all-equity ETF, the Bharat 22 ETF, closed on 17 November it was oversubscribed four times. This prompted it to raise the issue size to US$2.2 billion from the US$1.2 billion initially envisaged. It is now being hailed as the largest new fund offer in the history of India’s mutual fund industry.

Units of the Bharat 22 ETF, which tracks the performance of the 22 listed companies that it comprises, listed on the BSE and the National Stock Exchange of India on 28 November. The Department of Investment and Public Asset Management of the Ministry of Finance consequently successfully reduced its stake in the 22 companies.

“The value prospect for an investor is huge since it is very well-diversified” remarks Amit Aggarwal, a New Delhi-based partner at SNG & Partners, who led the firm’s team that advised the government on the transaction.


As detailed in the 113-page offer document for the ETF – the scheme information document – the particulars of the scheme were prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. A draft of the offer document was filed with the Securities and Exchange Bureau of India (SEBI) on 27 September. It includes a due diligence certificate from the fund’s asset management company, ICICI Prudential Asset Management.

The structure of Bharat 22 ETF, unlike that of its predecessor CPSE ETF, allows its asset manager to buy shares from the market to create units of the ETF in order to execute an additional offering. The ability to do this would be necessary in a scenario where the government wants to disinvest select underlying shares of the index and not all the shares.

“This has brought a lot of flexibility and was a major change between the two ETFs.” says Aggarwal, who along with senior associate Aditya Vikram Dua assisted the government to finalize the structure of the fund and its offer document.


The ETF could be offered only to qualified purchasers so as to avoid registering in the US. This special class of investors in the US needs to be managing no less than US$25 million, if they are investment managers, under the Investment Companies Act.

Bobby Majumder, a Dallas-based partner at Perkins Coie, who advised the government on the Rule 144A/Regulation S tranche of the ETF, says fund managers had to be advised on offering requirements in different jurisdictions.

Majumder, who is co-chair of the firm’s India practice, had similarly advised the government when it issued the first tranche of the CPSE ETF in 2014.

Cyril Amarchand Mangaldas advised both ICICI Prudential Asset Management and Kotak Mahindra Capital, which was an adviser to the government for the creation and launch of the fund. The firm says it did so “on a Chinese wall basis, with the consent of both parties”.


SNG & Partners began work on this transaction in July. This was the first time the firm had responded to a bid in relation to the government’s disinvestment effort.

“We wanted to get this kind of experience … but we were very clear that we will not underquote,” says Aggarwal.

Meanwhile, declining to comment on fees paid by the Indian government, Majumder says: “We saw it as a novel transaction and we were happy to be part of it.”


Department of Investment and Public Asset Management, Ministry of Finance

  • Domestic legal adviser: SNG & Partners with partner Amit Aggarwal and senior associate Aditya Vikram Dua
  • International legal adviser: Perkins Coie with partner Bobby Majumder

ICICI Prudential Asset Management

  • Cyril Amarchand Mangaldas with partner Shagoofa Rashid Khan
  • In-house legal team headed by Supriya Sapre, head, compliance and legal

Kotak Mahindra Capital


In a recent interview with The Hindu, the global head of exchange- traded products at S&P Dow Jones Indices, John Davies, described the Indian government’s use of ETFs for pursuing its disinvestment agenda as “original and unique”. According to Davies, “in no other market has the government used ETFs in such a way”.

The first ETF for this purpose was issued in March 2014 by the Manmohan Singh-led United Progressive Alliance government. The CPSE ETF comprises shares in 10 public sector enterprises including ONGC, Coal India and GAIL India and netted the government nearly US$1.9 billion. A second and third tranche of this energy-heavy ETF was issued in January and March of this year.

CPSE ETF is managed by Reliance Nippon Life Asset Management.

Diversified offering

Bharat 22 ETF has a wider sectoral coverage. It comprises central government held shares in 19 public sector enterprises including ONGC, State Bank of India, Indian Oil Corporation, National Aluminium Company, Bharat Petroleum Corporation and Bank of Baroda, as well as its holding in three private sector blue-chips – ITC, Axis Bank and Larsen & Toubro.

The shares of the three private sector companies currently account for 39% of the S&P BSE Bharat 22 Index, which is the underlying index of the fund. The weightage of each individual stock in the ETF is capped at 15% and each sector at 20% of the index. Bharat 22 ETF is managed by ICICI Prudential Asset Management.

Recent reports state that the government is looking to list Bharat 22 ETF internationally, following its success in India.