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PNB Gilts arrives at P/E ratio

Our Bureau

CALCUTTA, July 3

HOW do you determine the price-earning ratio of a company that is part of an industry without a benchmark P/E? Ask PNB Gilts Ltd, which pondered over this question in the run-up to its public issue, slated to open on July 11.

The industry P/E was not available as none of the country's primary dealers (PDs) is listed on stock exchanges, explained Mr. Arun Kaul, Managing Director of PNB Gilts. The benchmark, therefore, was arrived at by subtracting from the P/E of the BSE Sense x, the P/E of stocks of IT, pharma and FMCG companies. On June 2, this came to 8.7.

The company, the first PD to go public, has fixed a premium of Rs. 20 per share for its offer of 3.5 crore shares of Rs. 10 each. The average weighted earning per share (EPS) came to Rs. 8.65, based on the EPS figures for 1996-97 (annualised), 1997-98 an d 1998-99. These stood at Rs. 4.31, Rs. 11.02 and Rs. 8.52 respectively.

The book value per share, based on computations as on January 31, 2000, stood at Rs. 21.06. The same, after the issue as on March 31, 2001, was estimated at Rs. 28.52, according to the offer document of PNB Gilts.

The premium, Mr. Kaul said, has been okayed by the lead managers, chiefly JM Morgan Stanley (the others being Enam Financial and RR Financial). Among the qualitative factors that justify the offer price of Rs. 30, as listed by the company, are its lineag e, promoted as it is by Punjab National Bank, and a dividend-paying record.

PNB Gilts, incidentally, is the first PD to get the ISO 9002 accreditation. Also, the company's capital adequacy ratio stood at 76.77 per cent as on March 31, 2000, as against the RBI requirement of eight per cent.