Wednesday, December 8, 2010

IPO ANALYSIS: PUNJAB & SIND BANK (PSB) – BANKABLE – INVEST





The century old, state owned and north India focused bank is entering the capital market with an IPO, in the price band of Rs 113-120. PSB was one of the six banks that were nationalized in 1980.

The bank has a net work of 926 branches and around 630 branches are located in the northern part of the country.

The bank had a total business mix of Rs 89000cr as at the end of Sept -30-2010.

In the last 3 years the deposits have grown by 97%. Over the last 5 fiscals, advances have grown at a CAGR in excess of 36%.

The average business per employee, during 09-10, is one of the highest at Rs 9.63cr, as against the industry average of Rs 8.70cr. Interestingly the average business per employee in the private sector banks was at Rs 7.90cr during the same period.

PSB reported a net interest margin (NIM) of 2.67 for the year 09-10. Return on equity in the last 3 years was around 30%.

CARE has awarded IPO grade 4 indicating above average fundamentals.

The object of the issue is to augment funds for maintaining a capital adequacy ratio of 9% on risk weighted assets, as required by the RBI.

FINANCIALS:
RS IN CRORES

09
10
30-09-10

TOTAL INCOME

3631

4326

2523

NET PROFIT


 434

 501

 276

EPS (Rs)

  7.15

   26.70

   26.00#

EQUITY SHARE CAPITAL

 183.06

 183.06

 183.06

# annualized.



MATTERS OF CONCERN:

  1. Banking is highly competitive segment. In FY12 the RBI is likely to issue new banking licenses to few more players, which will further intensify the competition.
  2. PSB is a regional player, has little presence in Southern states and in the states of most progressive states like Gujarat, Maharastra, Bihar and Orissa.


VALUATION AND RECOMMENDATIONS:

At Rs 113-120, the issue is priced around 5 times its earnings for FY11 on its expanded capital of Rs 223cr. This compares favorably with other listed public sector banks. The recent / previous IPO of banks, like Indian Bank and United Bank have given good return on investments. The issue is attractively priced. INVEST.


ISSUE DETAILS:

ISSUE OPENS / CLOSES ON
13-12 / 16-12
ISSUE SIZE / FV
4 cr equity shares / RS 10
PRICE BAND
RS 113-120
BRLM
SBI CAPS, ENAM AND ICICI SECURITIES
IPO GRADE
4 BY CARE
POST ISSUE GOVT HOLDING
82.07%

14 comments:

  1. Thanks for the review Sir

    ReplyDelete
  2. thanks for the review...i think this will also go MOIL way with almost no allotment for poor retail investors!! It has become even more difficult now with 2 lakh limit. I didnt apply to MOIL for same reason and would avoid this one also after waiting till last day

    ReplyDelete
  3. Apply for this, you may get allotment.

    ReplyDelete
  4. DEAR SIR,
    I AM SUPPOSE TO BE A POOR INVESTOR!!
    I CAN INVEST ABOUT 20000.00 ONLY THIS TIME
    CAN I GET THE ALLOTMENT IN PUNJAB SIND BANK
    PLEASE TELL ME
    THANKS

    ReplyDelete
  5. You can apply. Allotment depends on your luck.

    ReplyDelete
  6. for 20000 u may get based on lottery....all luck ...i dont have 2 lakh to invest in one ipo...SEBI's decision is only getting poor retails investors to get out of primary market...so bad...if u have 2 lakh rs ready to apply in ipos coming all together...how u r retail investor ...??

    ReplyDelete
  7. Slowly build your portfolio, you too can have Rs 2lacs, one day. You can invest through Mutual Funds scheme.

    ReplyDelete
  8. Sir

    Kindly consider the following

    (a) Hiking the maximum amount of application to Rs 2.00 lacs without corresponding increase in Retail Quota as well as Hype created by Coal India IPO has obviously lead to very high 32.86 times subscription for MOIL IPO in Retail category.

    (b) For PSB, You rightly held the view “Invest” due to sound Fundamentals and attractive Pricing etc.

    (c) The Issue size of PSB is just 38 percent of MOIL size.

    (d) I am therefore afraid that PSB Issue will receive tremendous response resulting in allotment of just one lot of 50 shares only that too by lottery even to those who opt to apply for maximum lots blocking Rs 1.98 lacs.

    (d) 30 percent GMP for PSB is far below 50 percent GMP for MOIL

    In view of the above, please advise me* whether applying for PSB IPO will result in gaining Surplus or only losing Interest

    * I apply for IPOs for Listing Gains only.
    I took an oath to never trade in secondary market. I do have access to required funds to apply for maximum lots using five demat account of my family members

    Yours truly

    (K V Subba Rao)

    ReplyDelete
  9. Although FIRST CHOICE IPO has excellent track record in listing gain recommendations, more money is made, wealth is created by holding on to quality companies, instead of, off loading for listing gains. Keep investing in IPOs, some times you may get 100% allotment in good IPOs, where you can reap substantial profits.

    ReplyDelete
  10. Better to wait till last day and take a call. again heavy oversubscription. I avoided MOIL because of heavy oversubscription and will probably avoid this one as well.lets wait

    ReplyDelete
  11. Take a chance by applying for two lot.

    ReplyDelete
  12. Sir

    I have started thinking about Basis of Allocation aspect when I have got only 85 MOIL shares allocated in all five demat accounts of my family members by blocking Rs 9.90 lacs for about 10 days suffering interest at 12 % p.a. on Overdraft.

    I have verified No. of times Retail Subscription and No. of Shares allocated for recent ten IPOs and FPOs of different Issue sizes and different times of Retail subscription. After studying the information, I have noted, inter alia, the following:

    INFERENCE:
    If number of times subscription is high, say, over 18 times, No. of shares allocated is uniform for all levels (lots/shares) of subscription (Ex: MOIL, Career Point, ARSS Infra)

    If number of times subscription is less, No. of shares allocated is stepped up as subscription level goes up (Ex: Coal India, Va Tech Wabag, Gujarat Pipapav)

    (I am conscious that as the subscription level goes up, chances of allocation improve)

    Please advise whether my above Inference is correct or not. This is required by me to decide whether to restrict maximum amount per each demat account to Rs 1.00 lac or go upto Rs 2.00 lacs after taking note of your unbiased Views for individual IPOs/FPOs which are always based on Fundamentals and Pricing as well as Interest for OD and GMP

    Yours truly

    (K V Subba Rao)

    ReplyDelete
  13. Rule no 1. Do not invest borrowed funds into equity. It should come out of the savings.

    Allotment depends on price band, no of times oversubscribed etc., You may restrict the investment Rs 1lac. One should have patience in equity investing. Wealth is created over a period and not over night. Stay invested in quality companies and when there is dip one can pick up them in secondary market. First Choice do not believe in grey market premium, dis courages grey market activities.

    ReplyDelete