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PNB Gilts, a renowned and preferred name in the Indian debt market was one of the first entities to be granted the Primary Dealership License by the Reserve Bank of India. The company is also a subsidiary of one of the largest Indian commercial banks, Punjab National Bank. PNB Gilts has played a pivotal role in strengthening of the domestic fixed income markets and is a leading player, marking its presence with good market share in the overall trading turnover.
As a Primary Dealer, the company's primary activities entail supporting government borrowing program via underwriting of government securities issuances and trade in a gamut of fixed income instruments such as Government securities (g-sec), Treasury Bills, State Development Loans, Corporate Bonds, Interest Rate Swaps and various money market instruments such as Certificates of Deposits, Commercial Papers etc. It has a dedicated trading desk managed by experienced professionals having strong research and market insights.
Having completed around 19 years of operation, the company boasts of rich experience and matchless standards in its service to diverse client base in the fixed income market. It has been a pioneer in retailing of Government Securities contributing to a deep and broad-based market.
June 2016 quarter results
PNB Gilts registered 38% jump in interest income to Rs 97.98 crore in the quarter ended June 2016. As interest fell 8% to Rs 64.65 crore, net interest income jumped from Rs 24 lakh to Rs 33.33 crore.
Other income fell 80% to Rs 1 lakh which saw total income at Rs 33.34 crore against Rs 29 lakh. Operating expenses grew 13% to Rs 3.96 crore, after which OP stood at Rs 29.32 crore against a loss of Rs 3.29 crore.
Depreciation fell 33% to Rs 6 lakh and after providing for tax (Rs 9.95 crore against a write back of Rs 5 lakh) PAT jumped to Rs 19.37 crore against a loss of Rs 3.24 crore.
FY 2016 results
For FY 2016, PNB Gilts registered 16% fall in interest income to Rs 343.22 crore. A 6% rise in interest expenses to Rs 275.62 crore saw net interest income fall 55% to Rs 67.60 crore. Other income fell 8% to Rs 20 lakh which saw total income fall 55% to Rs 67.80 crore.
Operating expenses was down 1% to Rs 15.863 crore, after which OP fell 61% to Rs 51.94 crore.
PBT had fallen 61% to Rs 51.47 crore and PAT was down 61% to Rs 34.50 crore.
Book Value
Book Value per share stands at Rs 41.9 per share at end June 2016.
Adjusted Book value (adjusting for NNPA and 10% of restructured advances) stood at Rs 41.9 per share at end June 2016.
Loan profile
As on March 2016, secured loans (including market repo) of Rs 3065.22 crore comprised of Rs 1244.00 crore under RBI's LAF/Term Repo facility, Rs 679.31 crore under CBLO, Rs 337.00 crore under RBI refinance facility, Rs 18.01 crore under bank overdraft and Rs 786.90 under repo facility.
Unsecured loans of Rs 1855.45 crore comprise of call money of Rs 850.00 crore and Rs 1005.45 crore of lind of credit from Punjab national Bank.
Outlook
In India, ideal conditions are there for sustained downtrend in interest rates. This creates good conditions for bullish g-sec and bond market throwing up many trading and investment opportunities in the debt market. PNB Gilts is ideally placed to capitalise on these opportunities. The company proposes to be nimble footed in trading and also look for more stable avenues of revenue to maintain consistency in the returns to the stakeholders. The company shall also endeavor to focus on non- traditional sources of income like fee based services and equity markets.
While banks especially PSU banks with large g-sec holdings will also make good treasury profits in a bullish debt market, their overall profits are subject to burden of NPAs, while in case of PNB Gilts there is no credit risk as it is mainly in to investment and trading in g-secs only.
Valuation
The share price trades Rs 28.
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