The plan calls for divesting stakes in 18 companies via three ETFs -- the first of its kind -- that will offer residue shares in financial institutions, namely three banks and two insurance firms.
The government has 17% stake in Tejarat Bank, 17% in Bank Mellat and 18.32% in Bank Saderat Iran. The banks are listed with Tehran Stock Exchange. It also owns 17.34% of the shares in Alborz Insurance Company and 11.44% in Amin Reinsurance Company.
There are two other ETFs on the agenda for ceding shares in automotive companies and refineries.
Prospective investors should subscribe for units of bank-based ETFs, known as ‘First Financial Intermediary’.
Subscriptions start on May 3 and end May 20, as per a notice published on Shada, the Economy Ministry website.
Economy Minister Farhad Dejpasand on Saturday estimated the value of the first ETF to be approximately 165 trillion rials ($1 billion).
The ministry has announced that the move seeks to downsize, reduce government role in economic affairs and create space for private enterprise.
Divesting ownership via ETFs is said to be in the interest of both the government and buyers. It helps the former raise funds and (to some extent) plug its yawning budget deficits, and provide investment opportunity for large numbers of people even with limited funds.
“The divestiture provides a unique opportunity for all people to invest in state-owned companies,” the ministry said.
As per the framework, having a trading code is not obligatory in the subscription stage and the general public can buy ETF units using national IDs as trading codes. However, they have to receive a trading code later for trading their ETF units in the stock market.
The government has considered incentives for investment in state-controlled ETFs to encourage more people to get involved. Incentives include up to 20% discount on ETF prices.
There is no age limit on applicants and buyers are allowed to buy maximum 20 million rials ($125) worth of ETF units.
Only natural entity investors with Iranian nationality can subscribe while institutional and legal entities are barred.