Why BoB and PNB could be better fit for privatisation

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Why BoB and PNB could be better fit

According to analysts, BoB and PNB are better structures when it comes to divestment among public sector banks. Both the banks are trading at around 0.45 times the price to the book value.

“They [BoB & PNB] are better choices to attract investor’s interest. Under the consolidation exercise — BoB and PNB are better structured entities now. Relatively better quality companies were merged into them,” said Deven Choksey, managing director of KR Choksey Investment Managers.

He said the proposal to privatise two PSBs and one insurance firm is the beginning of the privatisation process and it could bring in many more banks eventually. “For investment perspective, such PSBs could attract new investors, which in turn should result in rerating them,” he said.

In a statement, PNB managing director and chief executive S.S. Mallikarjuna Rao described the strategic disinvestment plan a “step in the right direction”.

“Stake sale by the government in public sector companies and financial institutions, including 2 PSBs and one insurance company, in the next fiscal year is a welcome move,” Padmaja Chunduru, MD & CEO of state-run lender Indian Bank, said in a statement.

Unions oppose move

In its trend and progress report in December 2020, the Reserve Bank of India had noted that the merged entities can now reap benefits of synergy, especially in the case of branch network presence across regions.

For example, United Bank of India, which had a large presence in the eastern region, will now benefit from the more diversified branch network of PNB that had a vast network in the northern and central region before the merger.

FM Sitharaman said the necessary legislative amendments for PSB privatisation will be introduced in the current budget session of the Parliament.

However, the bank unions are not happy with the proposed exercise and said they will oppose it.

In a statement, All India Bank Employees’ Associatio