Punjab & Sind Bank IPO - Subscribe

Punjab & Sind Bank, a GoI undertaking is one of the 19 nationalized banks in India. In over 100 years of operation, the bank has significantly grown its branch network with a presence predominantly in north India.

Bank Credentials

·         The bank is primarily into the business of taking deposits & making advances & investments. It is principally divided into retail banking, corporate banking, priority sector banking, treasury operations and other banking services such as agency functions for insurance, distribution of mutual funds and pension and tax collection services.

·         As on July 31, 2010, the bank’s network comprised of 920 branches and 63 ATMs across India.

Financials

·         In FY10, the bank had posted an 18% jump in net profit to Rs 508.8 crore, from Rs 431.1 crore in the previous year. Total income rose by 19% to Rs 4,345.9 crore, while net interest income grew by 17% to Rs 1,183.9 crore and business rose by 37.9% to Rs 81,894 crore.

·         With the advances growing at a CAGR of 36.24% over the last five fiscals and total deposits growing at a CAGR of 28.24% over the last five fiscals, the bank is capable of delivering strong performance. 

Objects of the Issue:

The bank is raising funds to augment its capital base, to meet the capital adequacy norms for future capital requirements, growth in its assets, primarily its loan and investment portfolio due to the growth of the Indian economy and for other general corporate purposes.

Outlook

At the upper price band of Rs. 120, the issue is being made at book value, which stood at Rs.119.20 as on 30^th September’10. Keeping in view the expected earnings of around Rs. 30 for FY11, the PE multiple works out to an attractive 4 times.

The attractive valuations and sound fundamentals almost nullify the downside, even though upsides might take some time to fructify. We recommend long term investors to subscribe to the issue as it would be value accretive for one’s portfolio.

Snapshot

Issue Open: 13 Dec’10 – 16 Dec’10

Issue Type: 100% Book Building

Issue Size: 4 Crore

Face Value: Rs. 10 Per Equity Share

Issue Price: Rs.113 - Rs. 120 per share

Lot Size: 50 shares

Exchange: NSE/BSE