Punjab & Sind Bank IPO attractively valued: Angel

MUMBAI: Angel Broking is of the view that the initial public offering of Punjab & Sind Bank is attractively valued. It has recommended investors to ‘Subscribe’ to the issue.

“The bank’s low CASA ratio is expected to lead to NIM pressures in the current rising rate environment. Considering the recent hikes in FD rates by many banks and the resultant sharp correction in stock prices, especially of low CASA banks, the timing of the issue seems somewhat inopportune.

However, we believe the issue’s attractive pricing factors in the expected NIM pressures, when compared to relative valuations of peers with similar low CASA ratio. The bank’s peers are trading between 0.9x and 1.1x

FY2012E ABV; while at the upper end of the price band (`120), the bank will trade at 0.8x FY2012E ABV.

Valuing the bank at 1.0x FY2012E ABV would imply 21% upside from the upper end of the price band. Hence, we recommend a Subscribe to the issue on account of the relatively cheap valuations,” the report said.

The government owned bank has come out with issue of 40 million shares in the price band of Rs 113-120 per share. The issue closes Thursday.