Govt Agrees To Cut Stake In Pnb By 25% 25%

The government has agreed to a sharp reduction of 25 per cent in its holding in Punjab National Bank (PNB), which is returning Rs 138 crore of capital to the Centre while going in for an initial public offer (IPO).

The partial return of capital will reduce the banks capital base to Rs 212 crore from the current level of Rs 350 crore. After the IPO, the share capital will go up by Rs 70 crore to Rs 282 crore.

Thus there will be a reduction in the banks share capital which in turn will improve its earnings per share (EPS), currently at Rs 6.78 on a notional basis. We expect the post-issue EPS to go up to Rs 11.42 crore, a PNB source said. The bank plans to tap the international market with a GDR issue next year which will raise its share capital to the original level of Rs 350 crore.

 

It is expecting share premium in the band of Rs 65-75 which will enable it to garner Rs 490-590 crore. The IPO is likely to hit the market in December. The bank is going through the presentation exercise from merchant bankers vying for the mandate of lead manager. PNB sources said it will not be difficult to attract a premium of Rs 75, which was the premium charged by Bank of Baroda in a recent issue. The market for bank shares is clearly upbeat and there is also an improvement in the stock market scenario as a whole, a PNB source said.

The IPO will also enable the bank to increase its capital adequacy level from the current 9.15 per cent to over 10 per cent. A higher capital adequacy ratio will mean an improvement in spreads