Punjab National Bank (PNB), which was looking at offloading its stake in PNB Gilts, has not been able to find a buyer. It is now looking at merging PNB Gilts with itself.
PNB Gilts is a primary dealer in government securities and a subsidiary of PNB. The third largest public sector bank currently holds 75% in PNB Gilts and the rest is with retail investors.
?We would have liked to sell if off, but nobody has expressed any interest,? PNB chairman KC Chakrabarty told FE . ?We are looking at merger as one of the options because it does not make sense to have a separate subsidiary which is not into any business other than gilts. It can as well work as an in-house division. A merger will allow us to avail the Rs 400-500 million capital infused in PNB Gilts and put it to other use,? he explained.
?Over the years, banking has assumed a much larger definition and the business of government securities through a separate company is no longer a lucrative proposition,? said a banking analyst based in Mumbai.
Investment banking sources claim that the PNB management was looking at a price of Rs 35 a share to sell its stake. But the share of PNB Gilts, hovering around Rs 23, is not being able to trigger interest in potential buyers at that price. The PNB Gilts stock closed marginally down at Rs 22.55 on Friday on the Bombay Stock Exchange.
According to industry experts, the apex bank has already allowed such mergers and amalgamations from the point of view of viability. The Reserve Bank of India guidelines on the controlling structure of non-banking subsidiaries (of a bank) will not come in the way of such a merger.
Meanwhile, PNB has tied up with Japan?s Shinsei Bank Ltd and US investor JC Flowers to bid for 26 % stake in IFCI Ltd.