Please note that it no longer makes sense to indulge in dividend stripping and sell after the record date because dividend is now taxable in the hands of the shareholder. I agree with the first part of your statement - the share price should logically move up to the point where dividend yield is equal to FD rates (because investing in g-secs is probably even more safe than putting money in FD). Please note that the co has paid out dividend of Rs 10 per share in the last 6 months. Assuming yearly dividend of Rs 8-10 per share and FD rate of 6%, the price should be Rs 135 - 170 per share.
Thanks for the explanation though I must point out, the share price fell immediately(from Rs 57) on ex-date and is now 50 Rs odd. And I agree with your analysis that from a dividend yield POV, it is worth accumulating assuming a fairly steady state economic event horizon for some time. I will be adding more to my existing investment in this stock, thanks to your analysis.
Huge rally on the cards. Results expected to be very good, dividend will be even higher this quarter (~10% yield at CMP) and gsec yields have fallen substantially (6.00% now) due to RBI’s recently announced QE. PNB Gilts is the perfect, low risk, counter cyclical play in a very volatile market. A screaming buy.
Any stake sale on cards like PNB Housing? the management has been vocal previously. 9MFY21 income largely supported by trading income gains. Low interest rate environment likely remain conducive for the company
Hi Uvi - the income split as mentioned in my message above is almost equal between net interest income (300 cr) and trading income (344 cr). You have to understand that on a net worth of 1500-1700 cr the co is delivering a HUGE PAT of ~650-700 cr (annualized) conservatively which gives an ROE of 40%+. This is comparable with India’s best banks. Most importantly the co invests almost entirely in Gsecs. So risk of NPAs is virtually 0. On the stake sale front if and when it happens I would presume that would imply an even greater upside. Depending on the Q4 and FY21 results and dividends declared I will revise my commentary but for now the target of 150 is still sacrosanct. Disclosure: invested however still buying.
could someone help explain how the company has suffered a net loss on securities of close to 92cr in this quarter ?
i didnt find any explaination in the notes
PNB Gilts capped off a great FY21 with a muted Q4. However a deep dive reveals the fundamental and sustainable strengths of the business and the extremely high quality of earnings:
Q4 PBT (ignoring net loss on secs) = ~90cr vs Q3 PBT (ignoring net gain on secs) = ~85cr
FY21 PBT (ignoring net gain on secs) = ~370cr vs FY20 PBT (ignoring net gain on secs) = ~220cr
Cumulative dividends declared in the last 1 year = 3+3+4+3 = 13 per share. At CMP this translates into a yield of ~18%. Based on average VWAP for the last 12 months this translates into a yield of ~27%.
N/W grew by ~26% to ~1316cr
Stability in bond yields backed by best in class liquidity management augur well for the co
A key trigger for the co is India’s inclusion in the global bond index (likely to happen by October 2021). This would (in the course of time) further improve liquidity in Indian bond markets by opening the largely domestic bond market to a broader investor base
Dear Harsh - net loss on securities is largely M2M loss on the stock of g-secs. This varies quarter to quarter. In many quarters this is reflected as a net gain. Therefore the best way to analyse performance therefore is to ignore net gain / loss on securities and see the growth in earnings without this net gain / loss as well as to also look at the growth in net worth. Hope this was useful.
According to the new annual report 2021 page 43,they have mentioned that they have got rated 20 bil rupees(the company has not utlized the limits) rupees worth short term loans from India ratings,which they have not utilized.Hence the company is a ‘debt bargain’ ,i.e the company can be bought by someone for 1200 crore market cap,then he can avail loans based on the company’s operations worth 2000 crore,which he can use as he please.
The company also by policy invests only in AA bonds or rated higher.Not to mention the stock trades at 2.5 times 2020 earnings and has revenues rise by 10 times in the last 10 years.
Can there be clearer statistical bargain than this in this Bull market?P/E is very low and dividend yield is very high and backed by PNB ?Good revenue growth over the past 10 years.
Finally happened. Strange to see no activity in this thread.
Management commentary:
PNB Gilts still underwrites Government securities, it will keep writing when Foreign investment comes. Even if Bond prices go up due to demand, how does it Benefit PNB Gilts? Does it increase it’s margins?
It’s not like Govt was issuing 10K crore bonds now, and next year they are going to issue 1L crore of bonds.
Could someone explain?
