13 October 2015
2QFY16 Results Update | Sector:
Financials
DCB Bank
BSE SENSEX
26,847
Bloomberg
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
8,132
DCBB IN
282.0
37.5/0.6
151 / 81
-1/18/57
194
83.7
CMP: INR133
TP: INR90 (-33%)
Sell
Significant strategic shift leads to <10% RoE till FY18; Downgrade to Sell
In response to increasing competition intensity from both new and existing
players, DCBB has decided to almost double its branch network by Dec-16 – a
major shift from previous guidance of 25-30 branches per year. Headcount is
expected to increase by ~50% to 5400-5800 by Dec-16 (3674 currently). Aggressive
expansion coupled with management comments of higher pressure on margins
leads us to cut in earnings by 20-40% till FY18. Overall cost to income ratio is likely
to increase to 65%+ in FY16-18E from 59% in FY15.
2QFY16, earnings missed our estimates by 28% due to lesser than expected
trading gains (14% miss on non-interest income) and high opex (5% miss). Even
provisions and tax rate was higher than expected. Loan growth remains healthy at
7% QoQ and 27% YoY. CASA ratio improved 110bp QoQ to 24.1% and share of
retail deposits remains healthy at 80%+. Reported NIMs were flat QoQ at 3.8%.
Valuation and view:
Sudden shift in strategy is leading to sharp earning cut (PBT CAGR
of 16% vs 34% earlier) and ROE falling below 10% till FY17. Considering expansion
plans and strong growth, management may choose to raise capital over next 12-15
months, which will keep ROE at sub 10% for a prolong period. Management has
guided for ROA and ROE to improve to 1-1.2% and 14-16% by FY20-21 and near term
ROAs/RoE are expected to be 50-60bp and sub 10%. While strategy of aggressive
expansion will have long term benefit, prolonged pressure on ROEs (less than cost of
equity) is leading us to downgrade rating to
SELL.
Our new target multiple is 1.4x FY17
BV – INR90 (33% downside). We may tweak earnings post concall tomorrow.
Financials & Valuation (INR Billion)
Y/E Mar
NII
OP
NP
NIM (%)
EPS (INR)
2016E 2017E 2018E
6.0
3.1
1.5
3.7
5.4
7.3
3.3
1.6
3.6
5.8
8.0
66.1
9.2
0.7
22.9
2.0
9.1
4.4
2.2
3.5
7.8
34.8
73.9
11.2
0.8
17.0
1.8
EPS Gr. (%) -20.7
BV/Sh.(INR) 60.2
ROE (%)
ROA (%)
P/E(X)
P/BV (X)
9.3
0.8
24.8
2.2
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Dhaval Gada
(Dhaval.Gada@MotilalOswal.com); +91 22 3982 5505
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

DCB Bank
Key takeaways from the press release
Plans to add 150+ branches over next 12 months
DCBB has increased its branch addition guidance to 300+ branches by Dec-16
(160 branches as 2QFY16) v/s previous guidance of 25-30 branch addition per
year.
Headcount is expected to increase by ~50% by Dec-16 to 5400-5800 v/s 3674 in
2QFY16.
As per management, overall P&L (post tax) is expected to be negatively
impacted by INR90-150m in FY16, INR500-650m in FY17 and INR200-350m in
FY18. Cost to income ratio is likely to increase to 65-70% in FY16-18E from 59%
in FY15.
Also, DCBB plans to invest heavily in customer facing and frontline enabling
technologies including partnering with start-ups.
Margins to remain under pressure
Competitive intensity has been increasing both from new and existing players
leading to pricing pressures in all products and segments.
Further, if implemented in current form, adoption of marginal cost for base rate
computation is likely to have 50-75bp impact in FY17.
Asset quality pressures persist
As per management, environment has not improved much in last many months;
seeing cash flow challenges faced by the customers.
Recovery efforts have been intensified. However, legal cases are taking a long
time to achieve closure. Even customers who are ready to settle are not easily
finding eager investors to buy their business
In corporate portfolio, bank has been witnessing 2-3 accounts which continue to
show lot of stress.
RoA guidance downgraded; sub 10% RoE till FY18
RoA to be 50-60bp till FY18 on account of lower margins and significant opex
growth (150+ branch addition and ~50% headcount increase).
Resultantly, management expects RoE to remain sub 10% till FY18 and targets to
achieve 1% RoA / 14% RoE by FY20 and 1.2% RoA / 16% RoE by FY21.
Other highlights
Confident of sustaining 12-14% core fee income growth
Expects 14-16% CASA growth – at least 25% CASA ratio
Contingent to successful implementation of above expansion strategy, DCBB
may raise equity capital in next 12-15 months.
13 October 2015
2

DCB Bank
Exhibit 1: Quarterly performance (INR m)
Y/E MARCH
NII
% Change (Y-o-Y)
Other Income
Net Income
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (Y-o-Y)
2QFY16A
1,500
27
487
1,987
1,206
781
31
217
564
195
369
-10
2QFY16E
1,428
21
564
1,992
1,147
845
41
161
684
212
472
15
Var. (%)
5
-14
0
5
-8
35
-18
-8
-22
Higher than expected led by scarifies in one account
Tax rate higher than expected at 35% (expectation of 31%)
Comments
Adjusted for interest on IT refund, Reported NIMs stable QoQ
Lower than expected trading gains
Other opex (+27% YoY) higher than expectation
Source: MOSL, Company
Key highlights from 2QFY16 performance
Reported yield on loans
declined 21bp QoQ despite
no base rate cut in 1H
DCBB reported 22% miss on PAT, led by moderate operating performance (8%
miss, -13% QoQ) and higher provisions (+20% QoQ, 35% higher than estimate).
Loan growth remains strong (+27% YoY), led by mortgages (+35% YoY), agri
(+43% YoY) and CV loans (+106% YoY). Core retail deposits share remains
healthy at ~80% (stable QoQ).
NII growth was 5% higher than expected (+27% YoY, +7% QoQ). While reported
margins were largely stable at 3.8%, adjusted for INR52m interest on IT refund,
margins declined by ~10bp QoQ.
Non-interest income declined by 23% QoQ (+32% YoY) – 14% miss led by lower
profit on sale of investments in 2Q (INR52m v/s INR284m). Core fee income
growth remained stable 14% YoY (+17% QoQ).
Opex grew by 27% YoY (6% QoQ) led by other operating expenses which grew by
8% QoQ (+28% YoY). DCBB added 3 branches in 2QFY16.
GNPA increased 9% QoQ led by higher stress in SME and mortgage portfolio.
Slippages ratio for the quarter stood at 2.8% of loans (INR621m) – stable QoQ.
PCR, including technical write-offs, stands healthy at ~72% (stable QoQ).
Other highlights: a) CASA ratio improved 110bp QoQ to 24.1%, b) Provisions
include onetime sacrifice of ~INR50m on one of the SME account slipped during
1QFY16.
13 October 2015
3

DCB Bank
Valuation and view
We lower TP to INR90 (1.4x
FY17E BV); Downgrade to
Sell
Sudden shift in strategy is leading to sharp earning cut (PBT CAGR of 16% vs 34%
earlier) and ROE falling below 10% till FY17.
Considering expansion plans and strong growth management may choose to
raise capital over next 12-15 months, which will keep ROE at sub 10% for a
prolong period.
Management has guided for ROA and ROE to improve to 1-1.2% and 14-16% by
FY20-21 and near term ROAs/RoE is expected to be 50-60bp and sub 10%.
The stock currently trades at 2x FY17 BV and 23x FY17 EPS. While strategy of
aggressive expansion will have long term benefit, prolonged pressure on ROEs
(less than cost of equity of ~14.5%) is leading us to downgrade rating to SELL.
Our new target multiple (based on RI model) is 1.4x FY17 BV – INR90 (33%
downside).
Exhibit 2: We cut our earnings estimates by 22-38% for FY16-18E
INR b
NII
Other Income
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
Margins (%)
Credit Cost (%)
RoA (%)
RoE (%)
BV
ABV
EPS
FY16
5.9
2.5
8.4
4.8
3.6
0.7
2.9
0.9
1.9
3.5
0.5
1.1
11.8
62
58
7
Old Est.
FY17
7.5
2.8
10.3
5.7
4.6
0.8
3.8
1.1
2.6
3.5
0.5
1.2
14.1
71
67
9
FY17
9.6
3.2
12.8
6.7
6.1
1.0
5.0
1.5
3.5
3.6
0.5
1.2
16.1
84
78
12
Revised Est.
FY16 FY17 FY17
6.0
7.3
9.1
2.2
2.6
3.2
8.2
9.9
12.3
5.1
6.6
7.9
3.1
3.3
4.4
0.8
0.9
1.1
2.3
2.4
3.2
0.8
0.8
1.0
1.5
1.6
2.2
3.7
3.6
3.5
0.6
0.5
0.5
0.8
0.7
0.8
9.3
9.2
11.2
60
66
74
56
62
68
5
6
8
FY16
1.6
-11.4
-2.2
4.9
-11.9
17.0
-18.9
-12.3
-22.0
% Change
FY17
-3.2
-6.2
-4.0
15.6
-28.2
9.1
-36.3
-32.1
-38.1
FY18
-5.3
-0.2
-4.0
17.6
-27.8
9.1
-35.5
-31.2
-37.3
-2.5
-3.2
-22.0
-7.2
-11.7
-7.8
-12.5
-38.1
-37.3
Source: MOSL
Exhibit 3: One year forward P/BV
5.0
4.0
3.0
2.0
1.0
0.0
0.6
1.6
2.1
PB (x)
Peak(x)
Avg(x)
Min(x)
4.6
Exhibit 4: One year forward P/E
50
41
32
23
14
5
Negative
Earnings
Cycle
6.4
PE (x)
Peak(x)
Avg(x)
Min(x)
47.4
17.3
17.5
Source: MOSL, Company
Source: MOSL, Company
13 October 2015
4

DCB Bank
Exhibit 5: DuPont Analysis: Core profitability to come under pressure; RoE to be below 10%
DCB Bank
Net interest Income
Fee income
Fees to core income
Core Income
Operating expenses
Cost to core income
Employees
Emp cost to Opex (%)
Others
Core PPP
Non-interest Income
Trading and others
Operating profits
Provisions
NPA
Others
PBT
Tax
Tax rate
ROAA (%)
Leverage (x)
ROAE (%)
FY08
2.71
1.32
32.7
4.02
3.71
92.1
1.51
40.8
2.19
0.32
2.70
1.39
1.71
1.14
1.09
0.05
0.56
-0.03
-6.1
0.60
13.6
8.1
FY09
2.92
1.14
28.0
4.05
3.58
88.3
1.54
43.1
2.03
0.47
1.78
0.64
1.11
2.39
2.17
0.22
-1.28
0.02
-1.7
-1.30
11.6
-15.1
FY10
2.35
1.10
31.9
3.45
3.32
96.4
1.46
43.8
1.87
0.12
1.77
0.67
0.80
2.00
1.88
0.13
-1.20
0.09
-7.8
-1.30
11.2
-14.5
FY11
2.79
0.98
25.9
3.77
3.18
84.3
1.57
49.4
1.61
0.59
1.65
0.68
1.27
0.84
0.69
0.15
0.43
0.12
26.7
0.32
12.3
3.9
FY12
2.83
0.98
25.7
3.81
3.04
79.8
1.55
51.0
1.49
0.77
1.25
0.27
1.04
0.36
0.30
0.06
0.68
0.00
0.1
0.68
11.8
8.1
FY13
2.85
0.90
23.9
3.75
2.76
73.7
1.38
50.1
1.38
0.99
1.17
0.28
1.26
0.24
0.18
0.06
1.02
0.00
0.0
1.02
11.4
11.7
FY14
3.04
0.84
21.5
3.88
2.64
68.0
1.30
49.2
1.34
1.24
1.15
0.31
1.55
0.30
0.30
0.00
1.25
0.00
0.0
1.25
11.8
14.7
FY15
3.50
0.82
19.0
4.32
2.73
63.2
1.35
49.4
1.38
1.59
1.14
0.32
1.91
0.48
0.35
0.13
1.43
0.12
8.1
1.32
10.9
14.4
FY16E FY17E FY18E
3.34
3.25
3.23
0.76
0.74
0.73
18.6
18.5
18.4
4.10
3.98
3.96
2.81
2.94
2.80
68.5
73.7
70.7
1.39
1.45
1.38
49.4
49.4
49.4
1.42
1.48
1.42
1.29
1.05
1.16
1.21
1.16
1.13
0.45
0.43
0.40
1.74
1.47
1.56
0.45
0.40
0.41
0.45
0.40
0.41
0.00
0.00
0.00
1.29
1.07
1.15
0.45
0.34
0.37
34.6
32.0
32.0
0.84
0.73
0.78
11.1
12.6
14.3
9.3
9.2
11.2
Source: Company, MOSL
Exhibit 6: DuPont Analysis: Weak operating performance and increase in provisions lead to single digit RoE
DuPont Analysis
Interest Income
Interest Expense
NII
Other Income
Total Income
Operating Expense
Employee Expense
Other Expense
Pre-provisioning Profit
Provisions
PBT
Tax
RoA
Leverage (x)
RoE
4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16
9.68
9.37
9.72
10.07
9.89
10.92
10.19
10.11
9.80
9.97
10.00
6.56
6.38
6.42
6.81
6.67
6.61
6.61
6.65
6.44
6.51
6.40
3.12
2.99
3.30
3.25
3.21
4.31
3.58
3.46
3.35
3.46
3.60
1.26
1.62
0.99
1.14
1.07
1.07
1.12
1.36
1.20
1.56
1.17
4.38
4.61
4.29
4.39
4.29
5.38
4.70
4.82
4.55
5.02
4.77
2.74
2.76
2.84
2.78
2.68
2.86
2.88
2.88
2.79
2.81
2.90
1.37
1.35
1.40
1.37
1.32
1.44
1.44
1.40
1.37
1.42
1.44
1.36
1.41
1.43
1.42
1.36
1.42
1.44
1.48
1.42
1.39
1.46
1.65
1.84
1.45
1.60
1.61
2.52
1.82
1.94
1.76
2.21
1.88
0.34
0.31
0.25
0.35
0.35
0.71
0.42
0.52
0.37
0.44
0.52
1.31
1.54
1.20
1.26
1.26
1.81
1.40
1.42
1.39
1.77
1.36
0.00
0.00
0.00
0.00
0.00
0.42
0.15
0.21
-0.24
0.61
0.47
1.31
1.54
1.20
1.26
1.26
1.38
1.25
1.20
1.63
1.16
0.89
10.6
10.9
10.4
10.5
11.0
11.0
10.8
10.2
9.9
10.1
10.0
13.86
16.72
12.46
13.26
13.79
15.18
13.50
12.33
16.18
11.62
8.91
Source: Company, MOSL
13 October 2015
5

DCB Bank
Exhibit 7: Financials:
Valuation metrics
66
Rating
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
DCBB
FB
JKBK
SIB
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
CRPBK
ANDB
IDBI
DBNK
Public Aggregate
HDFC*
LICHF
DEWH
IHFL
GRHF
REPCO
IDFC
RECL
POWF
SHTF
MMFS
BAF
MUTH
NBFC Aggregate
Buy
Buy
Buy
Neutral
Buy
Buy
Sell
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
CMP
(INR)
287
1,077
491
655
734
945
133
65
91
22
243
137
142
176
298
180
144
139
45
70
77
43
1,277
476
227
734
266
702
61
263
244
1,006
234
4,974
181
Mcap
(USDb)
25.2
40.9
17.6
18.1
4.6
8.4
0.6
1.7
0.7
0.5
118.4
27.9
3.8
1.4
1.2
2.3
1.7
0.7
1.0
0.1
0.6
1.9
0.4
43.1
30.5
3.6
1.0
4.7
1.5
0.7
1.5
3.9
4.9
3.5
2.0
4.0
5.5
61.8
EPS (INR)
FY16
21.5
49.1
36.5
18.2
59.9
41.3
6.9
5.4
14.1
2.2
25.6
19.6
19.4
20.3
43.8
35.7
46.3
21.1
16.5
17.8
14.4
8.8
38
34
26
57
7
24
10
63
54
62
12
222
20
FY17
25.8
59.2
43.3
25.3
74.5
51.3
9.4
6.7
17.3
3.1
31.7
26.8
27.1
25.1
59.7
46.6
63.8
30.6
21.9
22.8
19.7
12.5
44
42
33
72
9
34
12
76
60
73
15
261
24
P/E (x)
FY16
10.4
21.9
13.4
36.0
12.3
22.9
19.4
12.0
6.4
10.2
17.9
9.0
7.0
7.4
8.7
6.8
5.0
3.1
6.6
2.7
3.9
5.4
4.8
7.7
21.9
14.0
8.6
12.9
38.4
28.7
6.3
4.2
4.5
16.1
19.4
22.4
11.8
15.3
FY17
8.3
18.2
11.3
25.9
9.8
18.4
14.2
9.6
5.2
7.3
14.9
7.3
5.1
5.3
7.0
5.0
3.9
2.2
4.5
2.1
3.1
3.9
3.4
6.0
17.2
11.2
6.9
10.2
30.5
20.6
5.3
3.5
4.0
13.9
15.4
19.1
9.9
13.1
BV (INR)
FY16
131
285
218
182
327
295
62
49
136
28
229
220
410
182
573
317
474
278
141
180
157
126
167
182
179
275
24
152
107
302
285
458
109
1,350
141
FY17
150
330
254
207
387
340
71
54
150
31
255
244
432
201
619
356
523
301
158
196
173
136
192
216
204
305
29
182
116
360
329
515
120
1,568
156
P/BV (x)
FY16
1.70
3.78
2.25
3.60
2.24
3.20
2.16
1.31
0.66
0.79
2.71
1.01
0.62
0.35
0.97
0.52
0.57
0.30
0.50
0.32
0.39
0.49
0.34
0.70
5.00
2.61
1.27
2.67
11.20
4.62
0.31
0.87
0.86
2.20
2.14
3.69
1.66
2.68
FY17
1.43
3.26
1.93
3.17
1.90
2.78
1.88
1.19
0.61
0.73
2.38
0.90
0.56
0.33
0.88
0.48
0.51
0.27
0.46
0.29
0.36
0.45
0.31
0.64
3.92
2.20
1.11
2.41
9.27
3.86
0.27
0.73
0.74
1.95
1.95
3.17
1.50
2.34
RoA (%)
FY16
1.54
1.89
1.78
1.01
1.68
2.04
1.07
1.02
0.85
0.47
0.70
0.57
0.20
0.61
0.39
0.56
0.57
0.50
0.54
0.55
0.58
0.36
2.60
1.49
1.27
4.08
2.23
2.20
1.75
3.22
3.07
2.10
1.92
3.13
2.75
FY17
1.58
1.86
1.82
1.32
1.73
2.08
1.15
1.06
0.92
0.59
0.77
0.70
0.25
0.68
0.48
0.65
0.69
0.65
0.64
0.62
0.69
0.44
2.60
1.54
1.29
4.19
2.09
2.32
1.83
3.23
3.03
2.28
2.20
2.84
2.83
RoE (%)
FY16
14.8
18.4
18.0
13.9
19.7
17.6
11.8
11.4
10.7
8.2
11.7
9.3
4.8
11.7
8.1
11.8
10.1
7.8
12.3
10.3
9.5
7.2
23.6
20.2
15.6
26.5
29.4
17.3
8.8
22.9
20.4
14.1
11.5
19.8
14.7
FY17
15.7
19.2
18.3
14.5
20.9
16.1
14.1
13.0
12.1
10.5
13.1
11.6
6.4
13.1
10.0
13.9
12.8
10.6
14.7
12.2
11.9
9.6
24.4
21.3
17.3
24.7
29.0
20.4
9.8
22.9
19.7
14.9
13.2
17.9
16.0
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
13 October 2015
6

DCB Bank
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Change (%)
Non-Interest Income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions (excl tax)
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
ASSET QUALITY
GNPA (INR M)
NNPA (INR M)
GNPA Ratio
NNPA Ratio
PCR (Excl Tech. write off)
E: MOSL Estimates
2010
4,594
3,174
1,420
-28.0
1,071
2,491
-21.5
2,008
483
-35.9
1,210
-727
57
-7.8
-785
-10.9
307
-55.2
2011
5,363
3,471
1,891
33.2
1,121
3,012
20.9
2,152
861
78.3
568
293
78
26.7
214
-127.3
597
94.3
2012
7,170
4,893
2,277
20.4
1,004
3,281
8.9
2,443
838
-2.6
287
551
0
0.1
551
157.0
739
23.7
2013
9,161
6,317
2,844
24.9
1,170
4,014
22.3
2,753
1,261
50.5
241
1,021
0
0.0
1,021
85.4
1,086
47.1
2014
11,283
7,599
3,684
29.5
1,387
5,071
26.3
3,191
1,880
49.0
366
1,514
0
0.0
1,514
48.3
1,609
48.1
2015
14,224
9,142
5,082
38.0
1,657
6,739
32.9
3,965
2,774
47.6
694
2,080
168
8.1
1,912
26.3
2,408
49.7
2016E
16,861
10,854
6,007
18.2
2,176
8,183
21.4
5,055
3,128
12.7
811
2,317
802
34.6
1,515
-20.7
2,528
5.0
2017E
20,532
13,262
7,271
21.0
2,600
9,870
20.6
6,572
3,298
5.4
892
2,406
770
32.0
1,636
8.0
2,598
2.8
(INR Million)
2018E
26,064
16,965
9,099
25.1
3,173
12,272
24.3
7,886
4,385
33.0
1,142
3,244
1,038
32.0
2,206
34.8
3,585
38.0
2010
2,000
3,990
5,990
47,873
3.0
16,928
17.5
5,056
2,447
61,367
3,323
20,179
24.4
34,597
5.7
1,358
1,909
61,367
2011
2,002
4,185
6,187
56,102
17.2
19,755
16.7
8,635
3,205
74,129
4,871
22,950
13.7
42,817
23.8
1,275
2,215
74,129
2012
2,407
6,179
8,585
63,356
12.9
20,347
3.0
11,263
3,565
86,768
4,566
25,178
9.7
52,844
23.4
1,846
2,335
86,768
2013
2,501
7,499
10,000
83,638
32.0
22,716
11.6
15,286
3,863
112,788
8,833
30,210
20.0
65,861
24.6
2,394
5,490
112,788
2014
2,503
9,007
11,510
103,252
23.5
25,813
13.6
8,631
5,839
129,231
6,896
32,724
8.3
81,402
23.6
2,386
5,824
129,231
2015
2,820
13,034
15,854
126,091
22.1
29,501
14.3
11,670
7,708
161,323
7,192
39,622
21.1
104,651
28.6
2,367
7,492
161,323
2016E
2,820
14,549
17,369
160,136
27.0
34,878
18.2
11,870
8,864
198,239
10,861
45,565
15.0
130,813
25.0
2,383
8,616
198,239
2017E
2,820
16,185
19,005
208,177
30.0
42,755
22.6
12,081
10,194
249,457
14,119
55,589
22.0
167,441
28.0
2,399
9,909
249,457
(INR Million)
2018E
2,820
18,391
21,211
268,548
29.0
52,450
22.7
12,293
11,723
313,775
17,821
67,819
22.0
214,324
28.0
2,416
11,395
313,775
3,192
1,076
8.7
3.1
66.3
2,636
412
5.9
1.0
84.4
2,418
302
4.4
0.6
87.5
2,150
491
3.2
0.7
77.1
1,385
740
1.7
0.9
46.5
1,861
1,057
1.8
1.0
43.2
2,694
1,564
2.0
1.2
42.0
3,341
1,815
2.0
1.1
45.7
4,321
2,191
2.0
1.0
49.3
13 October 2015
7

DCB Bank
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expense/Int.Income
Fee Income/Net Income
Non Int. Inc./Net Income
Efficiency Ratios (%)
Cost/Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury
Asset-Liability Profile (%)
Loans/Deposit Ratio
CASA Ratio
Investment/Deposit Ratio
G-Sec/Investment Ratio
CAR
Tier 1
Valuations
Book Value (INR)
Change (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
E: MOSL Estimates
2010
8.5
10.7
5.2
6.1
6.0
2.4
2.6
2011
8.8
10.4
6.1
5.9
5.6
2.9
3.1
2012
9.9
11.2
7.2
7.0
6.8
2.9
3.1
2013
10.2
12.0
7.1
7.3
7.3
2.9
3.2
2014
10.4
11.8
7.8
7.2
7.1
3.2
3.4
2015
10.9
11.8
7.2
7.3
7.3
3.6
3.89
2016E
10.4
11.2
7.6
7.0
7.0
3.4
3.70
2017E
10.1
10.9
7.2
6.8
6.7
3.3
3.57
2018E
10.1
10.9
7.2
6.8
6.7
3.4
3.5
-14.5
-1.3
69.1
93.0
43.0
3.9
0.3
64.7
91.3
37.2
8.1
0.7
68.2
97.0
30.6
11.7
1.0
69.0
95.6
29.2
14.7
1.3
67.3
94.7
27.3
14.4
1.3
64.3
94.6
24.6
9.3
0.8
64.4
92.7
26.6
9.2
0.7
64.6
92.9
26.3
11.2
0.8
65.1
93.5
25.9
86.8
43.8
67.6
-4.9
78.0
49.4
55.1
1.0
77.2
51.0
68.3
2.7
71.0
50.1
78.1
4.6
65.8
49.2
79.4
5.6
61.4
49.4
77.6
5.7
65.8
49.4
92.2
4.3
70.9
49.4
111.7
4.5
68.2
49.4
136.8
5.8
72.3
35.4
33.0
78.2
14.9
11.9
76.3
35.2
31.2
76.3
13.3
11.1
83.4
32.1
31.9
80.3
15.4
13.8
78.7
27.2
29.1
80.5
13.6
12.6
78.8
25.0
27.2
85.8
13.7
12.9
83.0
23.4
27.6
87.7
15.0
14.2
81.7
21.8
25.0
87.9
13.3
12.5
80.4
20.5
24.0
89.9
11.0
10.8
79.8
19.5
24.0
95.0
9.7
9.5
27.0
-12.5
5.1
23.3
5.9
-3.9
NM
-35.0
0.0
0.0
28.1
4.0
4.9
26.7
5.2
1.1
NM
128.4
0.0
0.0
33.4
18.8
4.1
32.5
4.2
2.3
113.7
60.1
0.0
0.0
37.8
13.3
3.6
36.5
3.8
4.1
78.4
33.7
0.0
0.0
44.5
17.5
3.1
42.4
3.2
6.0
48.2
22.7
0.0
0.0
54.9
23.4
2.5
52.3
2.6
6.8
12.1
20.3
0.0
0.0
60.2
9.8
2.3
56.4
2.4
5.4
-20.7
25.6
0.0
0.0
66.1
9.6
2.1
61.5
2.2
5.8
8.0
23.7
0.0
0.0
73.9
11.8
1.9
68.4
2.0
7.8
34.8
17.6
0.0
0.0
13 October 2015
8

DCB Bank
Corporate profile
Company description
DCB Bank is a new private sector bank based in
Mumbai, with presence across Retail, MSME, Agri
and Corporate banking serving mainly towards self-
employed clients. Mr. Murali Natrajan is the
current MD and CEO (since 2009) and has been
instrumental in complete overhaul of the bank. The
bank plans to double its Balance sheet size in the
next 3-3.5 years. As on September 2015, the bank
had a network of 160 branches and 373 ATMs.
Exhibit 8: Sensex rebased
Exhibit 9: Shareholding pattern (%)
Jun-15
Promoter
DII
FII
Others
16.3
23.0
16.2
44.5
Mar-15
16.4
23.5
14.7
45.5
Jun-14
18.5
14.6
14.5
52.5
Exhibit 10: Top holders
Holder Name
Tano Mauritius India Fvci Ii
PI Opportunities Fund - I
Dsp Blackrock Micro Cap Fund
Merrill Lynch Capital Markets Espana S.A
Wcp Holdings Iii
Ambit Corporate Finance Pvt. Ltd.
% Holding
4.6
2.8
2.2
2.1
2.1
1.9
Note: FII Includes depository receipts
Exhibit 11: Top management
Name
Nasser Munjee
Murali M Natrajan
Designation
Chairman
Managing Director & CEO
Exhibit 12: Directors
Name
Altaf Jiwani
Chakrapany Narasimhan
Imran Contractor
Jamal Pradhan
Keki Elavia
Nalin Shah
*Independent
Name
Rupa Devi Singh
S. Sridhar
Shaffiq Dharamshi
Suhail Nathani
Exhibit 13: Auditors
Name
BSR & Co LLP
Statutory
Type
Exhibit 14: MOSL forecast v/s consensus
EPS (INR)
FY16
FY17
FY18
MOSL
forecast
5.4
5.8
7.8
Consensus
forecast
7.2
9.3
11.7
Variation (%)
-25.3
-37.5
-33.5
13 October 2015
9

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