The Hindu Business Line : Bank of Punjab surges on takeover talk

BANK of Punjab touched a new high on the bourses on Wednesday, posting record volumes on the back of speculation that Scotiabank of Canada is acquiring a strategic stake in it.

Hectic trading at the bank's counter drove the share price up 11.75 per cent on the BSE before it closed at Rs 22.35, while on the NSE, the stock climbed 13.10 per cent, closing at Rs 22.45.

Trading volumes on the BSE stood at 20.36 lakh shares, up 102.7 per cent from yesterday's 10.04 lakh shares; on the NSE, volumes shot up by 174.4 per cent to 88.78 lakh shares.

A dealer at a local broking house said, "The stock has been attracting buying interest over the past few days. In fact, today a couple of fund houses entered the counter. The volumes at the counter definitely indicate a significant corporate development."

The counter was active since the early trading sessions with talks of Scotiabank, which has five branches in India, being close to acquiring a strategic stake.

However, Mr C.R. Sharma, Managing Director, Bank of Punjab, refuted the reports saying that there was no truth in these talks. On whether the bank was looking out for any kind of equity participation, he said,

"These are board-level decisions which will be taken at an appropriate time. As of now there is nothing on the table; if and when there is a proposal, the board will decide."

Despite the bank refuting the reports, rumours persisted with some segments in the markets estimating the deal to be struck at Rs 30-35 per share and expecting it to be announced over the next couple of days.

Meanwhile, the market was abuzz with talks that Scotiabank has mandated a merchant banker to initiate due diligence. However, the Scotiabank's India Head, Mr Denis Vaz, said that he would not comment on such talks.

"As a policy we do not wish to react to such talks," he told Business Line.

An expectation of a high dividend was also thrown in for good measure!

An equity analyst with local brokerage said, "The banking industry, in general, is going through a consolidation phase wherein old private sector banks are emerging as attractive takeover targets - given their ready branch network, customer base and technological advancement - for a foreign banks looking to establish a stronghold in India."

The analyst added: "The only area of concern would be quality of these banks which could be verified after a thorough due diligence. Also, these banks would need capital as they grow in an increasing competitive market. So it's a win-win for both sides."

According to the analyst, Bank of Punjab in particular has been reported to be on the lookout for equity participation for a long time.

"For a potential suitor, it offers a good branch network and established presence across the country, particularly the Northern region. Also, going forward, the bank would need capital as it grows, so a strategic sale or a complete sell-off is quite likely and, if and when it happens, would be positive for the counter."

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