Public sector player Punjab & Sind Bank (PSB) is drawing up plans to privately place equity shares with institutional investors ahead of an initial public offer next year.

The Delhi-headquartered bank intends to offer around 5 per cent each to institutional players such as the Life Insurance Corporation of India, General Insurance Corporation, Small Industries Development Bank of India (Sidbi) and UTI Asset Management Company, a bank executive familiar with the plans told Business Standard.

PSB, which has turned around over recent years by restructuring and recovering bad debt, was aiming to raise Rs 600 crore to Rs 700 crore by selling the stake to Sidbi.

This is a first private placement of its kind in the public sector banking space. At the start of the decade, LIC had acquired a 26 per cent stake in Corporation Bank. But by then the bank was already listed.

The executive said the bank's IPO, planned for 2010-11, could provide an exit route for investors who will participate in the private placement. As a move towards an IPO, the government had also restructured the bank's capital by converting Rs 560 crore of equity capital into perpetual debt instrument and preference shares.

PSB is one of the two unlisted banks of the country. The other player - Kolkata-based United Bank of India - is planning an initial public offer in the fourth quarter of the next financial year.

At the end of March 2009, Punjab & Sind Bank's capital adequacy ratio was estimated at 11.88 per cent, much above the regulatory requirement of 9 per cent. It intends to raise resources to fund its growth plans.

The bank sees 30 per cent year-on-year growth for at least two years and aims to reach a business figure (advances plus deposits) of Rs 100,000 crore by the end of 2010-11 against Rs 65,000 crore at present.