Institute for Integrated Learning in Management

Graduate School of Management

INVESTMENT BANKING PROJECT

PNB’S IPO

Submitted to:
Gurendra Bhardawaj Submitted by:
Rohit Chauhan

( Section- B )

PGDM 09-11
FT-09-825

ACKNOWLEDGEMENT

With profound sense of gratitude and regards, we would like to

express our sincere thanks to our guide and Investment Banking
lecturer, Prof. Gurendra Bhardawaj for his invaluable guidance
and the confidence he instilled in us. The earnest concern and
periodic counselling of our faculty has helped us immensely to
give shape to our thoughts and ensure completion of our project
report on time

We would also like to thank our dean Dr. Harpreet Kaur for her
timely support and co-operation. We would be failing in our duties
if we don’t acknowledge the library staff and computer lab staff,
without whose co-operation this project could not have been a
success.

Also, this acknowledgement would be incomplete without

thanking all our group members whose constant motivation, co-
operation, co-ordination and clarity of thoughts was the driving
force in reaching the completion stage.

Last but not the least we all would like to thank God and our
parents for their support and co-operation.
PNB is a leading public sector commercial bank in India, offering
banking products and services to corporate and commercial, retail
and agricultural customers. It started our operations in 1895 and
since then have grown to become India’s third largest bank
in terms of assets and second largest bank in terms of
number of branches. Although we began our operations in
the agriculturally rich areas of Northern India, we have expanded
our operations to provide products and services to over 35 million
customers across India through over 4,000 branches.

Its banking operations for corporate and commercial customers

include a range of products and services for large corporate
customers as well as for small and middle market businesses
and government entities. They cater to the financing needs of
the agricultural sector and have created innovative financing
products for farmers. They also provide significant financing to
other priority sectors including small scale industries. They offer a
wide range of retail credit products including home loans,
personal loans and automobile loans. Through its subsidiaries and
joint ventures, it deal in Indian government securities and provide
housing finance and asset management services.

Through its treasury operations, we manage our balance

sheet, including the maintenance of required regulatory
reserves, and seek to maximize profits from its trading portfolio
by taking advantage of market opportunities.
Since 1969, when it became a public sector bank, they have
managed to continue to grow business while maintaining a
strong balance sheet. As of September 30, 2004, its total deposits
represented 85.9% of its total liabilities. On average, interest
free demand deposits and low interest savings deposits
represented 43.8% of these deposits in the first six months of
fiscal 2005.

These low-cost deposits led to an average cost of funds excluding

equity for the first six months of fiscal 2005 of 4.7%. As of
September 30, 2004, its gross and net non-performing
assets constituted 7.65% and 0.30% of its gross and net
advances, respectively. In fiscal 2004 its total income was Rs.
96.5 billion and its net profit was Rs. 11.1 billion before
adjustment and Rs. 10.6 billion after adjustment as part of the
restatement of its financial statements for this Issue. In the first
six months of fiscal 2005 its total income was Rs. 51.9 billion and
its net profit was Rs. 7.4 billion. Between fiscal 2002 and 2004,
its total income grew at a compound annual rate of 12.5%,
its unadjusted and adjusted net profit grew at a compound
annual rate of 40.4% and 37.4%, respectively, and its total
deposits and total advances grew at a compound annual growth
rate of 17.1% and 17.2%, respectively.

IPO Details:-

Issue Price :- Rs 390 per share

No. of shares :- 8,00,00,000

Face value :- Rs 10 per share

Reservation for Employees :- 80,00,000

Bid/Issue Opened On :- Monday, March 7, 2005

Bid/Issue Closed On :- Friday, March 11, 2005

Price Band :- 350-390 per share

Issue is made through 100% Book Building Process.

Reasons for Issue

A) The main reason of issue for PNB is that they wanted to raise
their future capital requirements which arises out of the
implementation of the Base II standards and the growth in their
assets

B) And second reason for coming out with the IPO was that
government want to divest from PNB so proceeds from
3,00,00,000 shares out of total issue of 8,00,00,000 shares was
returned to govt.

Dividend Payment Post 2005

Date Interim Final

Dividend Dividend
16 June 2005 - 30%
29 Nov 2005 30% -
22 June 2006 - 60%
14 Feb 2007 40% -
07 Jun 2007 - 60%
29 May 2008 - 130%
04 Jun 2009 - 200%
04 Feb 2010 100% -
08 Jul 2010 - 120%

PNB has maintain a good amount of dividend pay-out post 2005.

It has declared final dividend all years after 2005. So, that very
good from point of view of shareholders.

It has also declared interim dividend in 2005, 2007 and 2010.

If we sum up all dividend pay out by PNB, then it comes out to be

770% i.e. Rs 77 ( 770% of Rs10 ).

During recession when Banks all over the world were fighting for
their survival, PNB then also continue to do well and maintain its
investor trust by paying them dividend.

EPS

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Earnings Per
45.65 48.84 64.98 98.03 123.86
Share

EPS indicates profit available for distribution to each shareholder.

Higher the EPS better it is for a company.
We can also evaluate performance of PNB post IPO through EPS
and as we can see EPS of PNB is continuously increasing over
Years.

From just over Rs 30 EPS in year 2004, PNB’s EPS has now
jumped up to Rs. 123.86 in 2010. It clear indicates that company
has done well over years and it has utilized its shareholders’ fund
very efficiently.

Share Price Analysis :

If we see the graph then we can analyse that the share prices of
PNB have shown tremendous growth. From about Rs 350 mark in
2005 it has now increased to over 1000 rupee mark.

And if we see the average monthly share price of PNB it is

Rs629.5 ( see calculations ) which is very good keeping in mind
the impact of recession.

P/E Ratio Analysis:

The P/E ratio (price-to-earnings ratio) of a stock (also called its "P/E", or simply "multiple") is a measure
of the price paid for a share relative to the annual net income or profit earned by the firm per share.

The average P/E ratio of PNB is 8.22 over the years which was
around 8.5 in 2005.So it means price paid for relative earning in
PNB is also going down which is good sign for the company.