Shares of Punjab National Bank (PNB) rallied over 8% in opening trade on Friday as investors cheered the government’s approval to divestment the public sector lender’s entire stake in UTI Asset Management Company. The move is being seen as part of the state-owned lender’s decision to pare its non-core assets to boost its capital base.

The PSU bank owns a 15.22% stake in UTI AMC and will sell its entire stake in the mutual fund company in single or multiple tranches for realisation of gain on investment. The UTI AMC’s valuation is pegged at around ₹1,329 crore.

Reacting to the news, shares of PNB opened 1.5% higher at ₹51.55, against the previous closing price of ₹50.80 on the BSE. In the first hour of the trade so far, the PSU bank stock gained as much as 8.1% to hit a fresh 52-week high of ₹54.90, while market capitalisation rose to ₹60,010 crore. There was a spurt in volume trade as 61 lakh shares changed hands over the counter on the BSE as compared to the two-week average volume of 73.24 lakh stocks.

PNB shares have delivered a return of 37.5% in a year, while it jumped 84% in the past six months. In the past one month, the stock has risen 27%, while it surged nearly 19% in a week.

"The exchange is hereby informed that the Bank has received approval of DIPAM, Ministry of Finance, Government of India for divestment of Bank's entire/part stake in UTI Asset Management Company Limited in single or multiple tranches subject to compliance of SEBI Regulations/other applicable regulatory guidelines," the bank said in a BSE filing on November 24.

“The timeline for making the divestment is yet to be finalized,” it added.

Established in November 2002, UTI AMC is the investment manager to the schemes of UTI Mutual Fund. It also manages offshore funds and provides support to the specified undertaking of the Unit Trust of India. UTI AMC has been promoted by four sponsors, namely, State Bank of India, Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank and presently, they collectively hold 45.16% of the shares of UTI AMC. In the last three years, UTI AMC posted a turnover of ₹1,060.27, ₹942.33, and ₹861.79 in FY22, FY21, and FY20, respectively.

In a separate development, CARE Ratings revised the outlook for the Bank's Additional Tier-I Bonds, Tier II Bonds, and Infrastructure Bonds from 'Stable' to 'Positive'. The reaffirmation of the ratings assigned to the debt instruments of PNB factored in the majority ownership and the demonstrated and expected continued support from the Government of India (GoI), which holds 73.15% shares in the bank, the agency said in its report.

Besides, the ratings also factored in PNB’s increased systemic importance and position in the Indian banking sector as well as strong and established franchise through its pan-India branch network, which helps it garner a low-cost and stable current account savings account (CASA) deposit base. The ratings, however, remain constrained by the moderate but improving asset quality parameters.

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