PNB Gilts, a frontrunner in the government securities market has reported 68% jump in 4QFY01 profits. Favourable interest rate scenario has fueled the profit growth of the company.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy)
Diluted Earnings per share*
P/E (at current price)
PNB Gilts currently offers various products including treasury bills, central and state government securities, PSU bonds, commercial papers, bill re-discounting and call money operations. It is the only listed company operating in the debt markets with turnover of Rs 33 bn. The company has a wide client base including banks, provident funds, pension funds, charitable trusts, insurance companies, other primary dealers, corporates and individuals.
FY01 started on a negative note for the company. Sharp increase in the international oil prices and continuous depreciation in rupee forced the RBI to increase bank rate and CRR. As a result, the company's financials took a hit in the first half of the year with increase in interest rates leading to a sharp fall in the prices of government securities, and volatility in the call money market. PNB Gilts had incurred a loss of Rs 392 m in the first half due to diminution in the value of securities.
PNB Gilts was also affected by Madhavpura Cooperative Bank scam. It had lent an amount of Rs 100 m in the call money market to the bank, which is still overdue. The company is initiating measures to recover the amount. However, in the absence of complete information and clarity of position in this regard a provision of Rs 50 m has been made by the company.
The second half (particularly 4QFY01) has however provided windfall gains to the company. Its operating profits soared by 70% backed by falling interest rates scenario. The RBI has already signaled lower interest rate regime going forward. This is positive for the company as with a fall in interest rates, gilt prices rise.
At the current market price of Rs 18 PNB Gilts is trading at a P/E of 5x and Price/Book value ratio of 0.7x FY01 earnings. The company has declared 18% dividend in the current year, which works out to a tax free dividend yield of 10.2%. It has a track record of paying dividend in the range of 18% - 22% in the last four years. The company's future performance is dependent on interest rate scenario. Although, the current trend is southward, a stable or a slight rise in rates could adversely affect financials to a certain extent.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407