The IPO of Punjab & Sind Bank (PSB) opened for subscription on Monday in the price band of Rs 113 to Rs 120 per share.

The last public sector bank to go public plans to raise Rs 470 crore by diluting 17.93 per cent of government holding. After the listing, government holding in the bank will come down to 82 per cent.

The bank has 926 branches and is predominantly present in north and central India. It has amongst the lowest non-performing assets in the PSU space (GNPA <1 per cent), has adequate capital (CAR at 13%), a strong government holding (82% post dilution) and healthy returns ratio (average RoE/RoA at 22%/1.0%).

The geographical concentration (78% of loans and deposits both) in north India, including Punjab, however has capped its loan-deposit ratio. With 9 per cent YTD growth in its loan book, the bank is focusing on increasing the share of retail and MSME portfolios.

The capital restructuring done in late 2008 has enhanced book value of the bank to Rs 111, translating into a valuation of 1.0x-1.1x trailing P/BV at the IPO price band.

On the basis of the above valuations, IIFL has recommended subscribe on the IPO.

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