Punjab and Sind Bank IPO attractively priced: Motilal Oswal

MUMBAI: According to Motilal Oswal the initial public offering of Punjab and Sind Bank ( PSB) is attractively priced. However, technology upgradation and HR issues are some of the issues that the bank needs to answer going forward.

“PSB registered loan CAGR of 38%, deposits CAGR of 31% and asset CAGR of 32% over FY06-10 with. Bank has less than 1% market share in overall business in India. As on 1HFY11, 26% of deposits, 25% of loans and 24% exposure is towards top 20 accounts.

“At the upper end of the price band PSB will trade at 0.8x FY12 BV as compared to peers at 0.9-1.1x P/BV of FY12E (with stronger return ratios). While the issue is attractively priced, key challenges such as lack of clarity on appointment of new CMD, technology up-gradation (execution risk), margin sustainability(comparatively weak liability franchise), and increase in opex cost (no clarity on pension and gratuity) would be key drivers for the stock performance in our view,” the report added.

Punjab and Sind Bank (PSB), a PSU bank wholly owned by government of India (pre-IPO), is coming up with its IPO of 40 million shares (face value of Rs 10). Price band for the issue is Rs 113-120. In addition, retail investors will get a 5 per cent discount.