The Hindu Business Line : PNB benefits on fund buying

INVESTORS in the initial public offering of Punjab National Bank (PNB) have gained considerably in a short period in an otherwise depressed market. In just over a months' time, PNB shares have risen almost 50 per cent over the issue price of Rs 31 due to sustained institutional buying.

The IPO opened for public subscription on March 21 and closed on March 28.

The increased buying has been from FIIs and mutual funds due to attractive valuation even at the listing price of Rs 36.

The PNB stock touched a high of Rs 48 on the BSE today. However at close, it ended at Rs 45, down 4.30 per cent from the previous close. The stock opened at Rs 46.75, got traded to an intra-day high of Rs 48 and touched a low of Rs 44.55. The total volume traded was at 2.72 lakh shares.

On the National Stock Exchange (NSE), the stock closed at Rs 45, lower by 3.64 per cent than Monday's close. It opened at Rs 46.85, also the day's high, and touched a low of Rs 44.65. Total volume in the NSE was at 9.64 lakh shares.

Analysts contend that one of the main reasons for the PNB stock gaining is the attractive pricing at listing.

The increased interest is also on account of few mutual funds getting shares in the IPO. There has also been FIIs interest in the shares as there was no allotment to them.

"This kind of rally is not possible without the participation of mutual funds which have been actively buying from the secondary markets, because they weren't allotted shares to the extent of their requirement during subscription," said a dealer with a leading domestic broking firm.

A section of analysts say that the rise in prices of PNB stock is only reflective of the overall healthy status of bank stocks. "All bank stocks have been witnessing activity these days and the rally is bound to settle at a certain level soon unless there are further triggers," said an analyst.

Another market participant is of the view that the PNB stock valuation is trying to catch up with the prices of other leading public sector bank stocks. Based on the annualised EPS of Rs 31 (on profit for the half-year ended September 2001), the share is quoting at P/E ratio of 1.45 compared to P/E of over 5 for other public sector banks, the analyst said.

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