Stocks I bought in April 2005

PNB Gilts

This subsidiary of Punjab National Bank is a Primary Dealer in Government of India securities. This stock appealed to me because:

• The company has been paying dividends ever since it came out with its IPO in 2000, and the dividend yield is good:
• The company paid dividends at 14%, 18%, 24%, 25% and 25% from 1999-2000 to 2003-2004.
• At 25%, the dividend yield at the price which I bought is around 13.8%, which is nearly twice the fixed deposit rates.
• The book value per share is more than twice the price I paid.
• At the price I bought, the P/E ratio is about two and a quarter.

Update

The company performed badly in 2004-2005 in its primary business, which is that of dealing in Government securities. This was mainly because of the fall in interest rates before and during the year. As a result, the company posted a net loss in 04-05, and consequently didn't pay a dividend.

However -- and this is what makes me think this is one amazing company,

• The company was able to absorb the losses using the carried-over surpluses from the previous year.
• Seeing that the downturn in interest rates may continue for a while, the company has proactively diversified into related activities, resulting in a profit for the first quarter of 2005-2006.

I see PNB Gilts as one example of an exceptionally well-managed company. I am planning to write an entry exclusively on what makes this company exceptional.

More Updates The company is back to making profits, and, true to form, has given out an interim dividend of 80 paise per share, which works out to around 4% yield on my cost price.