PNB to return Rs 1170 cr to government

Punjab National Bank (PNB) is set to return about Rs 1,170 crore to its promoter Government of India this weak before the end of the fiscal year 2004-05. This will be the first instance of a public sector bank returning capital to the government.

This follows PNB's follow-on offer to the public which hawked eight crore fresh shares. The issue closed on March 11.

The government will rake in Rs 1,170 crore through the return of three crore shares on factoring in the premium, said sources. The bank will, however, deduct the cost of raising money from the public while returning funds to the government. The newly issued shares are scheduled to be listed tomorrow.

Post the public issue, PNB's equity base expanded to Rs 345 crore out of which Rs 265 crore is the government's share. At the next stage, there will be a capital reduction from Rs 345 crore to Rs 315 crore as three crore shares (with a face value of Rs 10 each) are returned to the government. Post the capital reduction, the government's share in it will decrease to Rs 235 crore.

Post the issue, the government's holding in the bank shrunk to about 66 per cent from 80 per cent prior to the issue. The holding will further reduce to about 57 per cent after the return of capital to the government, said sources.

The public issue was a roaring success with the oversubscription levels crossing over 11 times. In fact, the issue was oversubscribed within minutes of its opening. On the very first day, the stock vaulted to its lifetime high of Rs 509.40 with a record combined turnover on both exchanges totalling to Rs 775 crore.

The issue was a book built one with the price corridor being Rs 350-390. Most of the issue was sold at the higher end of the price band which ultimate was the price of the issue.

None of the upcoming public issues of banks are being structured in such a way as to return capital to the government. The second public issues in the pipeline include that of Allahabad Bank, Oriental Bank of Commerce and Bank of Baroda.