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Punjab & Sind Bank set for Huge Oversubscription like MOIL IPO

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Punjab and Sind Bank has been very attractively priced by the Indian government which is divesting the last of the nationalized banks in India.The PSU Bank is being sold at a trailing P/E of 5x and P/B of 1.1-1.2x which is lower than the worst PSU bank trading in the secondary financial markets.On the other hand Punjab and Sind Bank is better than the average PSU Bank according to the Central Bank of India RBI report.Plus retail investors in India get an additional 5% discount of the issue price.Here is more on the valuation from the reasons to buy Punjab and Sind Bank post

Valuation – The Stock is being offered at roughly 1.1-1.2x Book Value (Net Worth of Rs 2100 crores) which is quite cheap compared to other PSU Banks in the space which trade at around 1.3x.The larger PSU Banks trade at around 1.5-2x which would make Punjab and Sind Bank a bit undervalued.In terms of trailing P/E,Punjab and Sind Bank looks more attractive being priced at 5x of its FY10 Net Profit of Rs 500 crore.That would make the stock at least 20-30% cheaper than the cheapest PSU Bank trading in the Indian markets today.

Note the issue size of the IPO is quite small at around $100 million which means the retail portion is only $30 million.Coal India IPO with a $3 billion issue and $1 billion retail portion got subscribed by almost 2-2.5x.This mean that Punjab and Sind Bank can get subscribed by almost 60x since MOIL IPO got 55-60 times overall subscription with almost 31x  retail portion even when the issue size was almost triple that of Punjab and Sind Bank.Note though MOIL IPO in my opinion was more undervalued than PNSB,still I think oversubscription in case of this PSU Bank would be higher than that and could easily cross the 31x retail that MOIL IPO got.


Abhishek Shah

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