Punjab & Sind Bank's Rs 500-crore IPO in June

State-run Punjab & Sind Bank (PSB) has decided to float its initial public offer (IPO) in June, as it seeks to raise Rs 500 crore from the public. It is likely to infuse another Rs 700 crore to fund its expansion plans till 2014-15.

The lender is targeting to achieve Rs 1 lakh crore of business by March 2011. It hopes to make a profit of Rs 500 crore this year.

In an interview with Business Standard, PSB Chairman and Managing Director GS Vedi said the bank had written to the department of financial services seeking clearance for the initial offer. The department has asked for some details and PSB was in the process of responding to it.

“We want to offer 40 million shares in the market with face value of Rs 10 each. We expect some premium on this price. So, we will raise about Rs 500 crore. There will be a dilution of 82-83 per cent equity, which will bring down the government stake to 82-83 per cent,” Vedi said.

The lender has sought recapitalisation support of Rs 700 crore from the government. If granted, this would take its total available capital to Rs 1,200 crore, which would be sufficient to meet the bank’s capital expansion requirements for the next four to five years.

“We got Rs 500 crore from the government five years ago, and since then, we have been on our own. More capital will help the bank in accelerating the pace of growth. It will be required for meeting the Basel-II norms, operational risks, additional wage payment and IT initiatives,” he said.

PSB will file its draft red herring prospectus with markets regulator Securities & Exchange Board of India in April.

“We are waiting for our March figures,” Vedi said. “At the moment, it will be only a public issue. We will think of a private placement later,” he said.