PNB Shares Gain Ahead of Board Meet to Consider Fund Raising of up to Rs 5,000 Crore

Sujeet Kushwaha

Punjab National Bank (PNB) soar over 1% on Friday ahead of the state-owned lender’s board meet on December 28 to consider proposals for raising up to Rs 5,000 crore in FY2024-25 through various modes.

The fund raising plans seem to have renewed investor interest in the stock that has already rallied 74% over the last six months. PNB shares have delivered blockbuster 138% returns over the last two years as well.

PNB Board to Mull Fund Raising Up to Rs 5,000 Cr

As per PNB’s regulatory filing, the board will consider the proposal for raising funds through any permitted modes or a combination of those during FY25.

This will include public issue, rights issue, qualified institutional placement, American Depository Receipts, Global Depository Receipts, foreign currency convertible bonds among others.

Analysts believe PNB could look at raising up to Rs 5,000 crore to fund its business growth plans amid the optimistic banking sector outlook.

The bank has also announced the closure of trading window for insiders and designated persons till December 30 as per SEBI’s PIT regulations.

PNB Share Gains 1% Ahead of Board Meeting

Ahead of the board meeting scheduled on Thursday, PNB shares were trading 1.2% higher at Rs 90.25 on the BSE at 10 AM on the last trading day of the week.

The stock hit an intraday high and low of Rs 90.95 and Rs 89.30 respectively.

With today’s gains, PNB share is just 2.3% away from its 52-week high of Rs 92.35 touched on November 30, 2022.

It has delivered stellar returns across short and long-term time frames. PNB shares have surged 56% YTD, 74% in six months, 66% in one year, 138% in two years and 166% in three years.

PNB Q2 Net Profit Jumps Over 3-Fold YoY to Rs 1,756 Cr

The board will consider the fund raising proposal on the back of strong Q2FY23 results by PNB.

The public sector lender had reported a massive 327% YoY jump in standalone net profit at Rs 1,756 crore for the September 2022 quarter, aided by higher NII and lower provisions.

PNB’s NII – the difference between interest earned and interest expended – registered a robust 29% growth to Rs 9,923 crore compared to Rs 7,707 crore last year.

The bank’s asset quality also showed marked improvement with the gross NPA ratio declining from 11.34% to 9.67% and net NPA ratio easing from 4.28% to 3.80% on a YoY basis.

Provisions more than halved to Rs 2,692 crore from Rs 5,618 crore last year on significantly lower bad loan additions.

The encouraging Q2 performance sets the stage for a healthy balance sheet growth and improved profitability for PNB over the coming quarters.

Outlook for PNB Share

The latest capital raising plans will further bolster the overall capital adequacy for PNB which stood strong at 15.70% with tier-1 ratio at 12.08% as of September 2023.

With expectations of sustained business growth, controlled bad loans and improved profitability, analysts are bullish on PNB share over the next 12 months.

ICICI Securities has a ‘buy’ rating on PNB shares with a price target of Rs 100 implying another 12% upside from current levels.

The brokerage expects RoA/RoE to improve to 0.8%/14% by FY25E on the back of margin expansion and lower credit costs.

Even as PNB share has already surged sharply recently, its valuation at 0.6x FY25E ABV remains quite reasonable compared to other PSU bank peers, ICICI Sec highlighted.

Most other analysts also have ‘buy’ or ‘outperform’ recommendations on the stock that seems to be in the cusp of a structural turnaround.

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Leveraging his government experience, Sujeet brings valuable insight on the stock market to readers. His passion for analysis drives coverage of equities and the latest financial news. When he's not busy dissecting stocks, Sujeet enjoys learning about new businesses and industries.
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