The Hindu Business Line : Punj Lloyd issue buoys Indbank's fortunes

INDBANK Merchant Banking Services Ltd hit the upper circuit on Monday at Rs 8.93 with bids in waiting for over 1.13 lakh shares (total traded shares were 12,218) and not without good reasons.

On Friday, Punj Lloyd announced the price band for its maiden public offering — Rs 600-700 per share. The company intends to raise around Rs 642 crore through the issue. On that peg hangs the tale of Indbank's rising fortunes.

Back in the early 90s, Punj Lloyd came out with its first public issue, which did not go through. Indbank Merchant was the underwriter and had to buy four lakh shares for Rs 5 crore. This year, the company received 1.4 lakh bonus shares.

Even at the lower end of the price band for Punj shares — Rs 600 — the value of Indbank's stock of shares is worth over Rs 32 crore.

Other than Punj Lloyd, Indbank's investment book is replete with shares trading which has been discontinued, but there are a few gems as well. Notable among them is Numeric Power Systems. The company's cost of 1.09 lakh shares of Numeric is stated as Rs 63.50 lakh. At the current price of Rs 340, the value of Indbank's holding works out to Rs 3.7 crore.

With Punj and Numeric, the value of Indbank Merchant Banking's investments should be more than Rs 40 crore, against the book value of Rs 13.36 crore as on March 31, 2005. Consequently, there could be a reversal of provisions in the profit and loss account, which will bolster the net profit.

Market analysts opine that Indbank may not liquidate its profitable shares in a hurry. The mood on Punj being buoyant, the company might want to hold it for a higher value.

All this is good news for Indbank Merchant's parent, Indian Bank, which holds close to 65 per cent stake in the subsidiary. The bank's loan to Indbank Merchant stood at Rs 46.43 crore on the last balance sheet date.

The increase in value of the investments, consequently, raises Indian Bank's hopes of recovery of the loans.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page