17 October 2017
2QFY18 Results Update | Sector: Financials
DCB Bank
Neutral
BSE SENSEX
32,609
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg. Val, INRm
Free float (%)
Financials & Valuations (INR b)
Y/E MARCH
2018E 2019E
NII
9.8
11.8
OP
5.3
6.5
NP
2.6
3.2
EPS (INR)
8.5
10.5
EPS Gr. (%)
21.5
23.2
BV/Sh. (INR)
83.8
93.8
RoE (%)
11.5
11.8
RoA (%)
1.0
1.0
P/E (x)
21.6
17.6
P/BV (x)
2.2
2.0
S&P CNX
10,234
DCBB IN
Strong operating profit, lower provisions aid YoY PAT growth
285
PPoP growth stood at -9%/+23% QoQ/YoY (in-line), driven by NII beat of 5%
56.5 / 0.8
(incl. INR72m of interest on IT refund). Other income grew -24%/6%
213 / 100
QoQ/YoY to INR3.1b (10% miss), as 1QFY18 had lumpy treasury income of
-4/-7/28
INR214m, leading to total income growth of 24% YoY (-1.7% QoQ).
378
85.0
Opex growth of 25% YoY exceeded total income growth of 24%, reversing
CMP: INR184
TP: INR197 (+7%)
2020E
14.4
8.0
3.9
12.8
21.7
106.1
12.8
1.0
14.4
1.7
falling CI ratio (60.3%, +300bp QoQ) trend of past few quarters. Provisions at
INR302m (+14% YoY, 4% miss) led to PAT growth of 21% YoY (7% miss).
Loan book grew 7%/21% QoQ/YoY to INR173b, led by strong growth in AIB
(+21% YoY), MSME (+31% YoY) and corporate book (+28% YoY), while other
categories such as CV/CE (+51% YoY) and gold (+21% YoY) also showed
strong growth. Corporate book inched up to 17% of loans.
Absolute GNPA/NNPA grew to INR3.2b/INR1.6b (+11%/+5% QoQ), driven by
16%/10% sequential growth in mortgage/AIB GNPA (INR1.16b/INR561m).
Overall slippages moderated to 2.2%, compared to 2.7% in 1Q. In
percentage terms, GNPA/NNPA came in at 1.8%/0.9% (+6bp/-2bp QoQ).
Other highlights:
a) CASA ratio declined ~100bp to 26% v/s 27% in 1Q. b)
Management expects GST-related issues with MSMEs to iron out gradually.
c) LAP growth has been impacted by redefined credit risk parameters,
balance transfer by HFCs and a reduction in the ticket size.
Valuation view:
We expect loan growth (23% CAGR) to stay ahead of system
loan growth. Back-ended loaded branch expansion costs would keep near-
term CIR elevated at ~60%. Return ratios are likely to remain muted in the
near term, with RoA/ RoE at ~1%/11-13%. Valuations at 2.0x/17.6x FY19E
BV/EPS leave limited upside. We maintain
Neutral
with a TP of INR197.
(INR Million)
FY17
2Q
5,063
3,160
1,903
26.9
616
2,519
1,511
1,009
29.2
265
744
259
485
31.3
3.8
30.4
29.1
81.6
2.6
1.8
FY18E
2Q
3Q
5,870 6,461
3,389 4,087
2,481 2,374
30.4
13.3
653
724
3,134 3,097
1,890 1,808
1,244 1,289
23.4
18.0
302
355
942
934
353
277
589
658
21.5
28.2
4.2
16.3
20.5
84.6
3.2
1.8
4.0
24.1
27.6
83.9
3.2
1.6
FY17
4Q
6,999
4,428
2,571
16.7
784
3,356
1,959
1,397
21.1
385
1,012
300
712
34.8
4.1
0.0
0.0
83.4
3.3
1.7
20,761
12,791
7,971
28.7
2,495
10,465
6,283
4,182
19.8
1,115
3,067
1,070
1,997
2.6
3.9
29.2
22.4
82.0
2.5
1.6
FY18E
24,990
15,232
9,758
22.4
3,018
12,776
7,481
5,295
26.6
1,397
3,897
1,286
2,611
30.8
4.0
21.0
23.0
83.4
3.3
1.7
Quarterly Performance
Interest Income
Interest Expense
Net Interest Income
% 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)
Operating Parameters
NIM (Cal, %)
Deposit Growth (%)
Loan Growth (%)
CD Ratio (%)
Asset Quality
Gross NPA (INR B)
Gross NPA (%)
E: MOSL Estimates
1Q
4,706
2,936
1,770
26.1
601
2,372
1,444
927
3.4
205
722
252
470
0.3
3.8
18.2
27.9
85.1
2.3
1.7
3Q
5,502
3,407
2,095
30.5
641
2,736
1,643
1,093
29.7
305
787
274
513
24.5
3.9
33.8
24.3
77.4
2.3
1.6
4Q
5,491
3,288
2,203
30.6
636
2,839
1,685
1,153
18.9
339
814
286
529
-24.0
3.9
29.2
22.4
82.0
2.5
1.6
1Q
5,660
3,329
2,332
31.7
858
3,189
1,825
1,364
47.1
355
1,009
357
652
38.7
4.1
22.2
22.0
84.9
2.9
1.7
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
| Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 3980 4393
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 3982 5540
| Anirvan Sarkar
(Anirvan.Sarkar@MotilalOswal.com); +91 22 3982 5505
Investors are advised to refer through important disclosures made at the last page 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
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)
2QFY18A
2,481
30
653
3,134
1,890
1,244
23
302
942
353
589
21
2QFY18E
2,355
24
725
3,080
1,843
1,237
23
290
947
317
630
30
Var. (%)
5
-10
2
3
1
4
-1
11
-7
provisions slightly higher than expected
Taxes were higher than expected
Comments
NII included INR72m of interest on IT refund
Other income lower than expected
Source: MOSL, Company
Loan growth stayed strong
at 21% led by growth in AIB,
MSME and corporate
books. Mortgage book
slowed marginally
Loan growth remains strong
Loan growth for the quarter came in at 7%/21% QoQ/YoY. Deposits grew
7%/16% QoQ/YoY, with CD ratio stable sequentially at 85%.
NIM was stable QoQ at 4.22%, however, adjusted for INR72.1m interest on IT
refund, NIM came in at 4.1%.
Loan growth was driven by growth in SME (+31% YoY), AIB (+21% YoY), and
Corporate banking (+31% YoY) books. While mortgages growth slowed down
marginally to ~18% YoY, CV (+51% YoY) and construction finance (+81% YoY)
registered strong growth in the quarter. Mortgages slowdown was on account
of the bank recalibrating their credit risk framework and increased balance
transfers.
CASA ratio declined 100bp
to 26% v/s 27% in 1QFY18
CASA growth continues, retail deposits at 77%
CASA ratio declined ~100bp QoQ to 26%, with total CASA deposits registering
4%/37% QoQ/YoY growth. Overall retail deposits grew 16% YoY with share of
retail deposits declining to 77% from ~80% in 1Q
CASA per branch (1yr lag) declined to INR 233m vs INR 251m in 1QFY18 and
INR242m in 1QFY17.
Asset quality declined in
mortgages and AIB
portfolios; GNPA%
increased 6bp QoQ to 1.8%
Slippages decline to 2.2%; Mortgages/AIB/CV under stress
Absolute gross NPA increased 11% QoQ to INR3.2b, GNPA ratio increased 6bp
QoQ to 1.8%.
Slippages declined 12% QoQ but stayed elevated at INR779m, with gross
slippage ratio declining to 2.2% v/s 2.7% in 1Q. Recoveries and upgrades came in
at INR473m (+43%/+82% QoQ/YoY), resulting in net slippage ratio of 0.7%
GNPAs increased steeply across CV (+37% QoQ), mortgages (+16% QoQ) and AIB
(+10% QoQ). The management highlighted that asset quality has faced
challenges from multiple factors such as GST, RERA, farm loan waivers et al, but
these issues are expected to iron out over the next few quarters
PCR including technical w/o increased to 71.96%.
17 October 2017
2

DCB Bank
Branch expansion target set
in 2015 completed, CI ratio
reverses declining trend to
increase 300bp QoQ to
60.3%
Branch expansion target reached; C/I at 60%
The bank adding 16 branches during the quarter to take total branch count to
306, meeting the target set in October 2015
Operating expenses grew 25% YoY, resulting in C/I ratio at 60.3%, marking a
reversal in CI ratio trend over the last few quarters
Tier 1 ratio stood at 12.9% post QIP in 1QFY18
DCBB 2QFY18 concall highlights
P&L related
Expect some cost of branch addition to be back-end loaded through the next
few quarters, which should be offset by improving productivity from older
branches.
Contingent liability of tax stands at INR190m, down from INR1b 2-3 years back.
Expect margins to stabilize at ~3.75% due to pressure on yields.
The bank targets 14% RoE for 4QFY19.
B/S related
LAP growth has been impacted by redefined credit risk parameters, and also by
balance transfer by HFCs and reduction in ticket size.
The bank is targeting 22%-25% balance sheet growth, continuing focus on SME
(INR4-5m).
More than 80% of their CV loans portfolio qualifies as PSL.
Asset quality
Recoveries and upgrades are from mortgages, gold, agri and SME; no
contribution from corporate
The bank has seen some impact on asset quality from GST, RERA, Demon, floods
and farm loan waivers.
Others
Will open 10-12 branches per year over the next 2 years. Will end FY18 at ~316
branches due to requirement of 25% branches in rural unbanked areas.
The bank is grabbing corporate loan share from PSU banks, but restricting itself
to corporates rated A and above.
Competition has intensified from HFCs, NBFCs, PSU banks for retail loans over
the past 3 years, but DCB’s pricing is competitive.
20-30 new customers added every year in corp. banking (INR200m-250m ticket
size).
The bank has experienced high dropouts in larger ticket loans (INR10m+).
The bank has introduced a new salary product ”NEO” to help HR deliver tax
benefits to employee through card.
The bank has met 14K MSME customers over last 2 months to educate them
about GST. They have a product “GST package” offered for free or at nominal
fee when the customer opens a bank account.
Except for some deposit-only branches in rural areas, all branches are full-
fledged bank branches.
17 October 2017
3

DCB Bank
Valuation and view
Management targets to double the balance sheet in next 3-3.5years. With
higher granularity in the portfolio asset quality performance to remain better
than peers.
Strong branch expansion and addition of employees would keep near term cost
to income ratio elevated at ~60% despite strong core income growth of 25%+.
We believe margins are near peak and further benefit on cost of funds would be
utilized to grow balance sheet.
Led by strong capacity building, return ratios to remain muted in the near term
at ~1% ROA and 11-13% ROE. Strong balance sheet growth coupled with low
internal accruals will keep capital consumption high.
We value the bank based on Residual income model (key assumptions Rf of
6.9%, Beta of 1.4x, risk premium of 5%, average growth of 16% over FY20-36
and terminal growth of 5%) and arrive at the target price of INR197 (2x Sept 19
BV v/s our earlier TP based on 2x Jun 19 BV). While balance sheet growth is
expected to remain strong (25% CAGR), valuations at 2.0x/17.6x FY19 BV/EPS
leave limited upside. Hence, we maintain
Neutral.
Exhibit 2: We largely maintain estimates
(INR b)
FY18
NII
9.7
Other Income
3.0
Total Income
12.8
Operating Expenses 7.7
Operating Profits
5.1
Provisions
1.2
PBT
3.9
Tax
1.3
PAT
2.6
Loans
198
Deposits
241
Margins (%)
3.96
Credit Cost (%)
0.60
RoA (%)
1.0
RoE (%)
11.4
Old Estimates
FY19
11.9
3.6
15.5
9.2
6.3
1.4
4.8
1.6
3.2
247
304
3.90
0.55
1.0
11.8
FY20
14.5
4.3
18.8
11.0
7.8
1.9
5.8
2.0
3.8
309
380
3.84
0.60
0.9
12.7
Revised Estimates
FY18 FY19 FY20
9.8
11.8 14.4
3.0
3.6
4.3
12.8 15.4 18.7
7.5
8.9
10.7
5.3
6.5
8.0
1.4
1.7
2.1
3.9
4.8
5.8
1.3
1.6
1.9
2.6
3.2
3.9
195
239
294
233
285
347
4.05 4.10 4.16
0.63 0.64 0.65
1.0
1.0
1.0
11.5 11.8 12.8
Change (%)
FY18 FY19 FY20
0.1
-0.5
-0.8
-0.6
-0.6
-0.7
-0.1
-0.5
-0.8
-2.4
-3.6
-3.2
3.4
4.1
2.7
14.0
20.4
10.0
0.1
-0.7
0.2
-2.8
-3.7
-2.7
1.6
0.8
1.7
-1.6
-3.2
-4.7
-3.2
-6.3
-8.5
Source: MOSL, Company
Exhibit 1: One-year forward P/BV
3.8
2.8
1.8
0.8
P/B (x)
Avg (x)
Max (x)
Exhibit 2: One-year forward P/E
P/E (x)
35.0
Avg (x)
Max (x)
3.3
2.7
2.2
1.8
0.9
3.0
25.0
15.0
5.0
30.7
21.1
16.7
12.3
8.0
22.0
Source: MOSL, Company
Source: MOSL, Company
17 October 2017
4

DCB Bank
Exhibit 3: DuPont Analysis: RoA/RoE to remain under pressure due to operating leverage
DCB Bank
Net interest Income
Fee income
Core Income
Operating expenses
Employees
Others
Core PPP
Non interest Income
Trading and others
Operating profits
Provisions
PBT
Tax
ROAA (%)
Leverage (x)
ROAE (%)
FY13
2.85
0.90
3.75
2.76
1.38
1.38
0.99
1.17
0.28
1.26
0.24
1.02
0.00
1.02
10.74
10.98
FY14
3.04
0.84
3.88
2.64
1.30
1.34
1.24
1.15
0.31
1.55
0.30
1.25
0.00
1.25
11.25
14.08
FY15
3.50
0.82
4.32
2.73
1.35
1.38
1.59
1.14
0.32
1.91
0.48
1.43
0.12
1.32
10.62
13.97
FY16
3.51
0.80
4.31
2.79
1.39
1.39
1.53
1.25
0.45
1.98
0.50
1.48
0.38
1.10
10.60
11.70
FY17
3.69
0.77
4.46
2.91
1.43
1.48
1.55
1.16
0.39
1.94
0.52
1.42
0.50
0.93
11.71
10.83
FY18E
3.62
0.87
4.49
2.78
1.36
1.42
1.71
1.12
0.25
1.97
0.52
1.45
0.48
0.97
11.91
11.55
FY19E
3.55
0.89
4.44
2.67
1.31
1.37
1.76
1.09
0.20
1.97
0.52
1.44
0.48
0.97
12.20
11.80
FY20E
3.69
0.93
4.62
2.75
1.34
1.41
1.87
1.11
0.18
2.05
0.55
1.50
0.50
1.01
12.67
12.76
Source: Company, MOSL
Exhibit 4: DuPont Analysis: Higher opex and lower other income dent operating profitability
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
2QFY16
10.00
6.40
3.60
1.17
4.77
2.90
1.44
1.46
1.88
0.52
1.36
0.47
0.89
10.04
8.91
3QFY16
9.94
6.23
3.71
1.09
4.80
2.85
1.43
1.42
1.95
0.48
1.46
0.51
0.95
10.18
9.70
4QFY16
9.76
6.08
3.67
1.34
5.01
2.90
1.43
1.47
2.11
0.59
1.52
0.01
1.51
10.46
15.83
1QFY17
9.72
6.07
3.66
1.24
4.90
2.98
1.50
1.48
1.92
0.42
1.49
0.52
0.97
10.66
10.36
2QFY17
9.75
6.08
3.66
1.19
4.85
2.91
1.44
1.47
1.94
0.51
1.43
0.50
0.93
11.14
10.40
3QFY17
9.73
6.03
3.70
1.13
4.84
2.91
1.40
1.51
1.93
0.54
1.39
0.48
0.91
11.20
10.16
4QFY17
9.28
5.56
3.72
1.07
4.80
2.85
1.38
1.47
1.95
0.57
1.38
0.48
0.89
10.87
9.71
1QFY18
9.36
5.50
3.85
1.42
5.27
3.02
1.50
1.52
2.26
0.59
1.67
0.59
1.08
10.02
10.80
2QFY18
9.85
5.69
4.16
1.10
5.26
3.17
1.55
1.62
2.09
0.51
1.58
0.59
0.99
8.98
8.87
Source: Company, MOSL
17 October 2017
5

DCB Bank
Story in Charts
Exhibit 5: Loan growth continues to be strong (+20% YoY)
Loan (INR b)
23 24
28
Growth YoY %
24
12
19
3
32 29
29 26
28 29
24 22 22
27 24 23
20
Exhibit 6: Loan mix remains largely stable QoQ
Mortgages
Others
26 24
14 14
16 16
3 3
24
13
15
3
24
13
14
3
CV/CE/STVL
SME/MSME
23
15
13
1
21
16
12
0
20
15
12
2
17
17
12
4
PL
AIB
15
17
12
7
15
17
11
3
16
17
11
3
Gold Loan
Corporate
16 16 15 17
17 18 17 17
11 12 11 12
2 3 6 5
39 38 40 42 43 43 45 45 45 43 44 43 44 43 44 42
Source: MOSL, Company
Source: MOSL, Company
Exhibit 7: Share of retail deposits declined ~260bp QoQ with
growth moderating to 16% YoY
Retail dep share (%)
30 31
27 29
26
20 18 20 19
Retail Deposit gr
32
25
23
20 16
Exhibit 8: CASA ratio (%) declined by 100bp QoQ
23
17
Source: MOSL, Company
Source: MOSL, Company
Exhibit 9: CASA mobilization per branch (1yr lag) declines to
INR233m
CASA per branch (1yr Lag) - INR m
285
260
235
210
185
233
267
277
Exhibit 10: GNPA increased by 11% QoQ. PCR incl. w/o
stable at 72%.
Gross NPA%
84
81 79
Net NPA %
PCR %
77 77
75
78
72 72 73
75 75 75 74
72 72
Source: MOSL, Company
Source: MOSL, Company
17 October 2017
6

DCB Bank
Story in charts
Exhibit 11: Reported quarterly NIMs strong at 4.2%
4.0 3.9 4.1 4.0 4.0 4.0
4.2 4.2
Exhibit 12: Fee income to average assets declined QoQ
Fee Income (INR m)
1.0 1.0
1.0 0.9 0.9
Fee Income to avg assets (%)
1.0 0.9 0.9
0.8 0.9
0.9
3.6 3.6
3.8 3.8
3.7 3.7 3.7 3.8
0.8
0.8
0.8 0.8
0.8
Source: MOSL, Company
Source: MOSL, Company
Exhibit 13: Opex growth was higher than income growth,
reversing CI ratio trend
Total Income Growth (%)
35
34 32
30
28
26
16
16
16
20
Opex Growth (%)
34
32
31
27
27
24
23
22
23
33
17
26 30
17
27
27 26 25
25
21
22 23
Exhibit 14: Tax rate increased to 37% (%)
Tax rate (%)
35 35 35
11 15
35 35 35 35 35 37
0
-17
23
0
0
Source: MOSL, Company
Source: MOSL, Company
Exhibit 15: Cost to income remains elevated at ~60%,
+300bp QoQ
Cost to Income Ratio (%)
Exhibit 16: Added 16 branches during the quarter taking the
total to 306
Branches
Source: MOSL, Company
Source: MOSL, Company
17 October 2017
7

DCB Bank
Exhibit 17: Quarterly snapshot
FY16
1Q
Profit and Loss (INR m)
Net Interest Income
Other Income
Treasury
Exchange Profits
Recovery
CEB
Total Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
PBT
Taxes
PAT
Asset Quality
GNPA
NNPA
GNPA (%)
NNPA (%)
PCR (Calculated, %)
Ratios (%)
Fees to Total Income
Cost to Core Income
Tax Rate
CASA (Reported)
Loan/Deposit
CAR
RoA (Reported)
RoE (Reported)
Margins (%) - Reported
Yield on loans
Cost of funds
Margins
Balance Sheet (INR B)
Loans
Investments
Deposits
CASA Deposits
Borrowings
Total Assets
Franchise
Branches
1,404
631
284
31
8
299
2,035
1,138
576
563
897
180
716
248
469
2,064
1,270
2.0
1.2
38.5
14.7
66.9
34.6
23.0
78.6
14.3
1.2
11.6
12.7
7.8
3.8
104
45
133
31
6
163
157
2Q
1,500
487
52
47
26
351
1,987
1,206
599
607
781
217
564
195
369
2,243
1,302
2.0
1.2
42.0
17.7
65.1
34.6
24.1
82.5
13.6
0.9
8.9
12.5
7.6
3.8
112
41
136
33
8
170
160
3Q
1,605
472
45
40
16
361
2,077
1,234
620
614
843
210
633
221
412
2,349
1,310
2.0
1.1
44.2
17.4
62.8
34.9
24.1
83.3
13.0
1.0
9.7
12.3
7.4
4.0
117
40
141
32
9
176
176
4Q
1,687
615
40
27
51
395
2,301
1,331
656
675
970
273
698
2
695
1,974
975
1.5
0.8
50.6
17.2
63.9
0.3
23.4
86.6
14.1
1.5
15.8
12.5
7.5
3.9
129
43
149
35
11
191
198
1Q
1,770
601
172
31
19
379
2,372
1,444
727
718
927
205
722
252
470
2,313
1,157
1.7
0.9
50.0
16.0
67.2
34.9
23.1
85.1
13.2
1.0
10.4
12.2
7.3
4.1
133
44
157
36
11
196
205
2Q
1,903
616
116
42
36
422
2,519
1,511
748
762
1,009
265
744
259
485
2,554
1,209
1.8
0.8
52.7
16.8
65.0
34.8
21.9
81.6
11.9
0.9
10.4
12.0
7.2
4.0
144
55
177
39
12
219
228
FY17
3Q
2,095
641
125
22
91
403
2,736
1,643
790
853
1,093
305
787
274
513
2,279
1,080
1.6
0.7
52.6
14.7
65.8
34.8
26.0
77.4
13.3
0.9
10.2
12.0
6.9
4.0
146
61
188
49
12
233
248
4Q
2,203
636
41
9
134
452
2,839
1,685
815
870
1,153
339
814
286
529
2,542
1,244
1.6
0.8
51.1
15.9
63.5
35.1
24.0
82.0
13.8
0.9
9.7
12.0
7.0
4.0
158
58
193
47
13
240
262
1Q
2,332
858
287
32
20
519
3,189
1,825
905
920
1,364
355
1,009
357
652
2,853
1,491
1.7
0.9
47.7
16.3
64.0
35.4
27.0
84.9
15.3
1.1
10.8
11.7
6.6
4.2
163
56
192
51
14
243
290
FY18
2Q
2,481
653
71
35
64
483
3,134
1,127
921
206
2,007
302
1,704
353
1,351
3,158
1,570
1.8
0.9
50.3
15.4
38.0
20.7
25.9
84.6
14.7
0.9
8.8
11.4
6.5
4.2
174
57
206
53
14
259
306
Source: MOSL, Company
Variation (%)
QoQ
YoY
6
-24
-75
9
226
-7
-2
-38
2
-78
47
-15
69
-1
107
11
5
6
-2
257
30
6
-39
-17
76
14
24
-25
23
-73
99
14
129
36
179
24
30
5
6
-236
-34
295
-22
-12
-1
7
2
7
4
4
6
-57
-67
26
20
5
16
37
15
18
17 October 2017
8

DCB Bank
Exhibit 18: Financials: Valuation metrics
Rating
66
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
IDFC Bk
FB
DCBB
JKBK
SIB
Equitas
RBL
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
GRHF
REPCO
DEWH
Housing Finance
RECL
POWF
Infra Finance
SHTF
MMFS
BAF
SCUF
MUTH
SKSM
Asset Finance
NBFC Aggregate
Financials
FY19E
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Under Review
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
CMP
Mcap
EPS (INR)
P/E (x)
FY19E
8.9
18.2
12.5
21.3
13.7
20.2
12.6
13.9
16.5
5.1
6.0
22.6
23.1
10.9
9.4
6.3
6.7
5.5
3.4
5.9
7.3
BV (INR)
P/BV (x)
FY19E
1.06
3.28
1.79
3.16
2.88
3.23
1.23
1.56
2.04
0.61
0.65
2.07
3.76
0.97
0.76
0.56
0.94
0.55
0.42
0.35
0.75
RoA (%)
FY18E
1.23
1.84
0.90
1.78
1.85
1.85
1.03
0.72
0.92
0.69
0.54
1.92
1.24
0.36
0.36
0.23
0.60
0.31
0.45
0.28
0.64
FY19E
1.22
1.80
1.30
1.95
1.84
1.86
1.06
0.75
0.96
0.72
0.59
1.66
1.27
0.45
0.43
0.33
0.75
0.43
0.59
0.31
0.68
RoE (%)
FY18E
9.8
18.9
9.9
14.5
22.6
16.4
8.7
10.0
11.8
11.6
10.0
8.9
15.2
7.3
6.7
6.0
11.9
7.0
9.7
5.2
9.6
FY19E
10.5
19.3
15.2
16.0
23.0
17.2
10.1
11.7
13.1
12.5
11.3
9.6
17.4
9.3
8.3
9.2
14.8
10.5
13.0
6.1
10.6
(INR) (USDb) FY18E FY19E FY18E
282 25.4 17.8 20.5 11.1
1,439 57.1 66.7 79.0 21.6
507 18.7 23.9 40.6 21.2
879 25.0 32.3 41.3 27.2
1,617 10.6 97.0 118.4 16.7
1,437 13.3 58.7 71.2 24.5
60
3.2
3.8
4.8 15.7
93
2.5
5.2
6.7 17.7
180
0.8
8.6 10.9 20.9
79
0.6
13.0 15.4 6.0
23
0.5
3.1
3.8
7.3
166
0.9
6.2
7.4 26.9
560
3.1
18.5 24.3 30.3
291
156
149
176
314
155
152
264
35.1
5.1
2.4
6.3
2.6
1.7
0.8
2.0
16.9
12.4
14.5
19.0
35.9
30.5
21.0
30.1
23.3
16.6
23.7
26.1
57.6
45.3
26.0
35.9
15.3
12.5
10.3
9.3
8.8
5.1
7.3
8.8
FY18E FY19E FY18E
158.0 172.4 1.25
379 439 3.80
250 284 2.02
238 278 3.69
468 562 3.46
383 444 3.75
45
49
1.32
54
60
1.70
77
88
2.32
117 129 0.67
32
35
0.70
73
80
2.28
130 149 4.32
243
191
249
167
525
328
413
324
262
205
267
187
569
368
433
352
1.06
0.81
0.60
1.05
0.60
0.47
0.37
0.81
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
1,475
632
955
378
751
389
207
163
1,051
332
1,269
2,264
390
772
36.0
5.0
6.2
2.1
0.7
1.9
6.3
6.7
3.7
2.9
10.5
2.3
2.4
1.6
38.4 43.2 21.2
46.9 55.3 13.5
84.4 102.7 11.3
10.1 12.0 37.5
34.0 40.2 22.1
36.7 42.7 10.6
35.0
27.2
81.9
10.9
47.5
134.5
34.5
42.8
40.4
30.2
100.5
14.1
64.0
164.6
40.0
55.1
5.9
6.0
12.8
30.4
26.7
16.8
11.3
18.0
16.6
11.4
9.3
31.5
18.7
9.1
5.1
5.4
10.5
23.6
19.8
13.8
9.7
14.0
225
249
316
34
210
278
196
169
558
117
207
870
182
243
283
294
358
41
247
311
227
191
637
125
261
1,008
207
298
3.61
2.53
3.03
11.16
3.58
1.40
1.05
0.96
1.88
2.84
6.14
2.60
2.15
3.17
2.52
2.15
2.67
9.20
3.05
1.25
0.91
0.85
1.65
2.65
4.86
2.25
1.88
2.59
1.78
1.60
3.13
2.46
2.14
1.37
3.10
2.76
2.74
1.34
3.59
3.73
4.11
4.58
1.83
1.63
3.00
2.44
2.09
1.31
3.12
2.72
3.00
1.50
3.66
3.85
4.12
4.18
18.1
20.3
28.3
32.7
17.5
13.9
19.1
17.0
15.5
9.6
25.5
16.5
20.2
19.3
17.1
20.3
30.5
32.0
17.6
14.5
19.1
16.8
16.7
11.6
27.3
17.5
20.6
20.4
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries Source:
Company, MOSL
17 October 2017
9

DCB Bank
Financials and Valuation
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 (%)
Pref. Dividend (Incl tax)
Profits for Equity SH
Change (%)
Equity Dividend (Incl tax)
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
Balance Sheet
Y/E March
Equity Share Capital
Equity Share Capital
Preference Share Capital
Reserves & Surplus
Net Worth
Of which Equity Networth
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
Slippage Ratio
Credit Cost
PCR (Excl Tech. write off)
E: MOSL Estimates
2013
9,161
6,317
2,844
24.9
1,170
4,014
22.4
2,753
1,261
50.5
240
1,021
0
0.0
1,021
85.2
1,021
85.2
0
1,086
47.1
2014
11,283
7,599
3,684
29.5
1,387
5,071
26.3
3,191
1,880
49.1
366
1,514
0
0.0
1,514
48.3
1,514
48.3
0
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
26.2
1,912
26.2
0
2,408
49.7
2016
16,985
10,790
6,195
21.9
2,205
8,400
24.6
4,909
3,490
25.8
879
2,611
666
25.5
1,945
1.7
1,945
1.7
0
2,971
23.4
2017
20,762
12,791
7,971
28.7
2,495
10,465
24.6
6,283
4,182
19.8
1,115
3,067
1,070
34.9
1,997
2.7
1,997
2.7
143
3,630
22.2
2018E
24,990
15,232
9,758
22.4
3,018
12,776
22.1
7,481
5,295
26.6
1,397
3,897
1,286
33.0
2,611
30.8
2,611
30.8
154
4,613
27.1
2019E
29,940
18,117
11,823
21.2
3,622
15,445
20.9
8,903
6,542
23.6
1,740
4,801
1,584
33.0
3,217
23.2
3,217
23.2
154
5,871
27.3
INR million
2020E
35,976
21,617
14,359
21.5
4,310
18,669
20.9
10,684
7,986
22.1
2,140
5,845
1,929
33.0
3,916
21.7
3,916
21.7
154
7,289
24.2
2013
2,501
2,501
0
7,499
10,000
10,000
83,638
32.0
22,716
11.6
15,286
3,863
1,12,788
8,833
30,210
20.0
65,861
24.6
2,394
5,490
1,12,788
2014
2,503
2,503
0
9,007
11,510
11,510
1,03,252
23.5
25,813
13.6
8,631
5,839
1,29,231
6,896
32,724
8.3
81,402
23.6
2,386
5,824
1,29,231
2015
2,820
2,820
0
13,034
15,854
15,854
1,26,091
22.1
29,501
14.3
11,670
7,708
1,61,323
7,192
39,622
21.1
1,04,651
28.6
2,367
7,492
1,61,323
2016
2,844
2,844
0
15,062
17,906
17,906
1,49,260
18.4
34,899
18.3
11,494
12,524
1,91,185
8,916
43,333
9.4
1,29,214
23.5
2,480
7,242
1,91,185
2017
2,854
2,854
0
19,179
22,033
22,033
1,92,892
29.2
46,892
34.4
12,774
12,765
2,40,464
11,925
58,179
34.3
1,58,176
22.4
4,886
7,298
2,40,464
2018E
3,071
3,071
0
25,230
28,302
28,302
2,33,399
21.0
56,949
21.4
15,876
14,680
2,92,256
15,704
63,416
9.0
1,94,557
23.0
10,187
8,392
2,92,256
2019E
3,071
3,071
0
28,305
31,376
31,376
2,84,747
22.0
70,617
24.0
19,929
16,147
3,52,199
19,195
69,123
9.0
2,39,305
23.0
14,925
9,651
3,52,199
2020E
3,071
3,071
0
32,078
35,150
35,150
3,47,392
22.0
87,543
24.0
25,197
17,762
4,25,501
23,473
75,344
9.0
2,94,345
23.0
21,240
11,099
4,25,501
2,150
491
3.2
0.7
1.42
0.28
77.1
1,385
740
1.7
0.9
1.47
0.40
46.5
1,861
1,057
1.8
1.0
2.14
0.36
43.2
1,974
975
1.5
0.8
2.15
0.45
50.6
2,542
1,244
1.6
0.8
2.03
0.51
51.1
3,281
1,566
1.7
0.8
1.50
0.63
52.3
3,802
1,579
1.6
0.7
1.45
0.64
58.5
4,629
1,821
1.6
0.6
1.45
0.65
60.7
17 October 2017
10

DCB Bank
Financials and Valuation
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.
* 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
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
3.9
2016
10.6
11.6
7.4
7.2
7.3
3.4
3.9
2017
10.5
11.5
7.8
7.0
6.9
3.6
4.0
2018E
10.0
11.7
6.6
6.7
6.7
3.3
4.0
2019E
10.0
11.6
6.6
6.5
6.5
3.4
4.1
2020E
10.0
11.6
6.6
6.4
6.4
3.6
4.2
11.7
1.0
69.0
25.7
29.2
14.7
1.3
67.3
23.1
27.4
14.4
1.3
64.3
20.5
24.6
11.8
1.1
63.5
21.2
26.2
10.8
0.9
61.6
19.5
23.8
11.5
1.0
61.0
18.3
23.6
11.8
1.0
60.5
19.1
23.5
12.8
1.0
60.1
19.4
23.1
71.0
50.1
65.8
49.2
61.4
49.4
61.5
49.9
62.8
49.0
61.9
48.8
60.3
48.8
59.4
48.8
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
86.6
23.4
26.7
92.0
14.1
12.8
82.0
24.3
24.7
82.0
13.8
11.9
83.4
24.4
27.2
82.0
14.7
12.8
84.0
24.8
24.3
82.0
13.7
11.9
84.7
25.2
21.7
82.0
12.9
11.1
37.8
13.3
36.5
4.1
78.2
0.0
44.5
17.5
42.4
6.0
48.2
0.0
54.9
23.4
52.3
6.8
12.1
0.0
61.6
12.3
59.2
6.8
0.9
0.0
68.2
10.7
2.7
65.2
2.9
7.0
2.3
26.7
0.5
0.3
83.8
22.8
2.2
83.8
2.2
8.5
21.5
21.6
0.5
0.3
93.8
11.9
2.0
93.8
2.0
10.5
23.2
17.6
0.5
0.3
106.1
13.1
1.7
106.1
1.7
12.8
21.7
14.4
0.5
0.3
17 October 2017
11

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 December 2017, the bank
had a network of 248 branches and 496 ATMs.
Source: MOSL/Bloomberg
Exhibit 1: Sensex rebased
Exhibit 2: Shareholding pattern (%)
Sep-17
Promoter
DII
FII
Others
15.0
22.8
21.4
40.7
Jun-17
15.0
20.5
22.5
41.9
Sep-16
16.2
21.3
20.0
42.5
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Tano Mauritius India FVCI II
Matthews India Fund
Prazim Trading And Investment Co. Pvt. Ltd.
DSP Blackrock Micro Cap Fund
Sundaram Mutual Fund A/C Sundaram
Select Midcap
% Holding
4.3
4.0
2.9
2.6
1.7
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Nasser Munjee
Murali M Natrajan
H V Barve
Designation
Chairman
Managing Director &
CEO
Company Secretary
Exhibit 5: Directors
Name
Altaf Jiwani
C Narasimhan
Jamal Pradhan
Nalin Shah
S Sridhar
Suhail Nathani
Name
Amin Manekia
Imran Contractor
Keki Elavia
Rupa Devi Singh
Shaffiq Dharamshi
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Ananthasubramanian & Co
BSR & Co LLP
Type
Secretarial Audit
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
FY20
MOSL
forecast
8.5
10.5
12.8
Consensus
forecast
8.5
10.9
13.6
Variation (%)
0.0
-3.7
-6.2
Source: Bloomberg
Source: Capitaline
17 October 2017
12

DCB Bank
NOTES
17 October 2017
13

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DCB Bank
Disclosure of Interest Statement
Analyst ownership of the stock
DCB Bank
No
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17 October 2017
14