By Akshay Jain
Assuming all the LoUs signed by PNB for Gitanjali Gems and all its related parties for Rs. 11,000 crore will turn bad, there is still a hope for PNB to revive back based on “as of date reserve balance” and “year-on-year profitability”.
As of 31st March 2017, PNB has reserves amount of over Rs.37,000 crores with a book value of Rs. 157 per share. This implied that the share is trading less than the 2/3 of P/E ratio. Even after the above bad LoUs, the reserve amount will stay over and above 25,000 crores. Also, the NP margin is staying at 5 % based on the average profit for the last 5 years.
This fraud has a short to medium term impact on the Company’s Valuation, however, in the long run, the bank has the ability to gain back the reputation as the valuation looks good.
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