23 May 2020
4QFY20 Results Update | Sector: Financials
DCB Bank
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
DCBB IN
310
19.8 / 0.3
245 / 61
-30/-41/-52
216
CMP: INR64
TP: INR70 (+10%)
Neutral
Asset quality deteriorates further; Outlook under watch
60% of loan book availed moratorium
Financials & Valuations (INR b)
FY20 FY21E
Y/E MARCH
12.6
13.5
NII
7.5
7.9
OP
3.4
2.3
NP
3.7
3.7
NIM (%)
10.9
7.6
EPS (INR)
3.6
-30.6
EPS Gr. (%)
105.9 113.0
BV/Sh. (INR)
99.3
98.7
ABV/Sh. (INR)
Ratios
11.2
7.1
RoE (%)
0.9
0.6
RoA (%)
0.0
6.6
Payout (%)
Valuations
P/E (x)
P/BV (x)
P/ABV (X)
5.6
0.6
0.6
8.0
0.5
0.6
FY22E
14.5
8.4
3.2
3.7
10.4
37.5
122.9
108.3
9.1
0.8
0.0
5.8
0.5
0.6
DCBB has created higher than the required provisions toward COVID-19,
which affected PAT. Business growth too moderated, further reflecting the
challenging macro environment due to the lockdown. Asset quality should
remain under watch as 60% of the bank’s loan portfolio availed
moratorium. Thus, we expect credit cost trends to remain elevated.
We cut PAT estimate for FY21/22E by 27%/29%, as we factor in higher
credit cost and moderate business growth trend. Maintain
Neutral.
Business growth moderates; COVID-19 provisions affect earnings
Shareholding pattern (%)
As On
Mar-20 Dec-19 Mar-19
Promoter
14.9
14.9
14.9
DII
35.3
32.8
25.1
FII
22.8
24.6
26.0
Others
27.0
27.7
34.0
FII Includes depository receipts
DCBB’s 4QFY20 PAT stood at INR688m (29% YoY decline; in-line), affected
by higher provisions (INR1.2b). The bank made provisions of INR630m
toward COVID-19, which is higher than the RBI requirement.
NII growth moderated ~8% YoY to INR3.2b, led by moderation in loan
growth (7.5% YoY) and 7bp QoQ decline in margins to ~3.6%. Other income
grew ~11% YoY (18% QoQ) led by treasury gains of INR174m (+149% QoQ)
while core fee income stood muted at 2.5% YoY. Opex increased ~3% YoY to
INR2.2b, resulting in an improvement in the C/I ratio by ~330bp QoQ to
~51%. During FY20, NII/PPoP/PAT grew 10%/16%/4% YoY.
Loan growth moderated further to 7.5% YoY impacted by the lockdown in
the last few days of Mar’20 and continued sluggishness in few business
segments such as corporate banking/SME/MSME. Deposit growth too
moderated ~7% YoY to ~INR304b, led by 4% YoY decline in CASA while retail
TD grew 14% YoY. Retail TD plus CASA formed ~78% of total deposits.
On the asset quality front, fresh slippages remained elevated at INR1.5b
(2.6% annualized). As a result, GNPA/NNPA ratio deteriorated by
31bp/13bp to ~2.5%/~1.2%. PCR stood at 53.5% v/s 52.8% in 3QFY20.
Overdue accounts (where asset classification benefit was availed) stood at
INR893m, on which the bank made provisions of 10%, as per the RBI norms.
Moratorium update:
Home loans (52%), Business Loans – LAP (56%), MSME
(60%). Overall, 60% of the loan book is under moratorium as at end- Apr’20.
Highlights from management commentary
Most DCBB customers in business loans, SME, MSME and CV segments
would qualify for the government guarantee scheme.
Near-term strategy is to focus on preservation of balance sheet, reducing
operating expenses and maintaining high liquidity.
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020
 Motilal Oswal Financial Services
DCB Bank
Valuation and view
DCBB reported moderation in 4QFY20 business growth, reflecting the challenging
macro environment. The bank expects business trends to remain weak as focus in
the near-term is on preservation of balance sheet and risk reduction. We also
remain watchful of asset quality as ~60% of the bank’s loan portfolio has availed
moratorium. With the recent extension of moratorium for another three months,
we expect the proportion of borrowers availing moratorium to increase further as
economic activity is still at a nascent stage of recovery and borrowers would need
more time to recuperate from the COVID-19 crisis. We, thus, expect credit cost
trends to remain elevated in the near term, and therefore, cut our PAT estimates for
FY21/FY22E by 27%/29%. We estimate DCBB to deliver FY22E RoA/RoE at
0.8%/9.1%. Maintain
Neutral
with a revised TP of INR70 (0.6x FY22E ABV).
Quarterly performance
1Q
2,730
17.1
828
3,558
2,144
1,414
3.7
332
1,082
387
695
6.6
250.3
212.4
30.7
30.6
4.0
1.9
1.5
0.7
61.6
FY19
2Q
2,818
13.6
735
3,553
2,092
1,461
17.4
319
1,142
408
734
24.7
261.7
220.7
27.2
26.9
4.1
1.8
1.6
0.7
62.1
3Q
2,936
17.2
945
3,881
2,143
1,738
41.8
401
1,336
475
861
51.0
275.1
228.9
29.2
23.1
4.5
1.9
1.6
0.7
63.3
4Q
3,009
14.1
994
4,002
2,150
1,853
30.9
348
1,505
542
963
50.0
284.4
235.7
18.4
15.9
4.4
1.8
1.5
0.7
65.0
1Q
3,048
11.6
868
3,915
2,250
1,665
17.8
406
1,259
448
811
16.6
287.9
240.4
15.0
13.2
4.8
2.0
2.0
0.8
58.9
FY20
2Q
3,134
11.2
1,014
4,148
2,302
1,845
26.3
433
1,413
499
914
24.5
293.6
248.0
12.2
12.4
5.2
2.1
2.4
1.0
54.5
FY19
3Q
3,231
10.0
931
4,162
2,263
1,899
9.3
590
1,309
342
967
12.3
297.3
254.4
8.1
11.1
5.5
2.2
2.6
1.0
52.8
4Q
3,237
7.6
1,099
4,336
2,215
2,121
14.5
1,182
938
251
688
-28.6
303.7
253.5
6.8
7.5
6.3
2.5
2.9
1.2
53.5
11,493
15.5
3,502
14,994
8,529
6,466
23.2
1,401
5,065
1,812
3,254
32.7
284.4
235.7
18.4
15.9
4.4
1.8
1.5
0.7
65.0
FY20
12,649
10.1
3,911
16,560
9,030
7,531
16.5
2,612
4,919
1,540
3,379
3.9
303.7
253.5
6.8
7.5
6.3
2.5
2.9
1.2
53.5
4QE
3,023
0.5
970
3,993
2,355
1,638
-11.6
776
863
179
683
-29.1
303.7
253.4
6.8
7.5
5.7
2.2
2.8
1.1
51.7
(INRm)
V/s our
Est
7.1
7.1
13.3
8.6
-5.9
29.4
26.0
52.4
8.8
39.8
0.6
0.4
0.0
0.0
0.0
0.0
9.9
0.2
5.7
0.1
1.8
Net Interest Income
% Change (Y-o-Y)
Other Income
Total Income
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Provisions
Profit before Tax
Tax
Net Profit
% Change (Y-o-Y)
Operating Parameters
Deposit (INR b)
Loan (INR b)
Deposit Growth (%)
Loan Growth (%)
Asset Quality
Gross NPA (INRb)
Gross NPA (%)
Net NPA (INRb)
Net NPA (%)
PCR (%)
E:MOFSL Estimates
23 May 2020
2
 Motilal Oswal Financial Services
DCB Bank
Quarterly snapshot
FY18
1Q
Profit and Loss (INR m)
Net Interest Income
Other Income
Total Income
Operating Expenses
Employee
Others
Operating Profits
Core Operating Profits
Provisions
PBT
Taxes
PAT
Balance Sheet (INR B)
Loans
Investments
Deposits
CASA Deposits
Borrowings
Total Assets
Asset Quality
GNPA
NNPA
Ratios (%)
Asset Quality
GNPA (%)
NNPA (%)
PCR (Calculated, %)
PCR (Reported, %)
Business Ratios
Fees to Total Income
Cost to Core Income
Tax Rate
CASA
Loan/Deposit
Profitability Ratios
RoA
RoE
Yield on loans
Cost of funds
Margins
Others
Branches
ATM
2,332
858
3,189
1,825
905
920
1,364
1,077
355
1,009
357
652
163
56
192
51
14
243
2,853
1,491
1Q
1.7
0.9
47.7
72
16.3
64.0
35.4
27.0
84.9
1.1
10.8
11.7
6.6
4.2
290
504
2Q
2,481
653
3,134
1,890
921
969
1,244
1,173
302
942
353
589
174
57
206
53
14
259
3Q
2,505
749
3,254
2,029
970
1,059
1,225
1,170
343
883
313
570
186
57
213
55
19
272
4Q
2,637
849
3,486
2,070
1,017
1,053
1,416
1,374
388
1,028
386
642
203
62
240
58
19
302
3,690
1,467
4Q
1.8
0.7
60.2
76
18.0
63.4
37.5
24.3
84.7
0.9
10.2
11.3
6.5
4.07
318
533
1Q
2,730
828
3,558
2,144
1,087
1,057
1,414
1,261
332
1,082
387
695
212
71
250
62
20
312
4,006
1,539
1Q
1.9
0.7
61.6
76
16.8
64.4
35.8
24.6
84.9
0.9
10.8
11.2
6.6
3.90
323
536
2Q
2,818
735
3,553
2,092
1,102
990
1,461
1,430
319
1,142
408
734
221
70
262
64
20
325
FY19
3Q
2,936
945
3,881
2,143
1,103
1,040
1,738
1,626
401
1,336
475
861
229
75
275
67
25
344
4Q
3,009
994
4,002
2,150
1,049
1,101
1,853
1,763
348
1,505
542
963
236
78
284
68
27
358
4,395
1,538
4Q
1.8
0.7
65.0
79
16.2
58.8
36.0
23.8
82.9
1.1
13.7
11.6
7.1
3.78
333
504
1Q
3,048
868
3,915
2,250
1,162
1,088
1,665
1,506
406
1,259
448
811
240
80
288
71
27
363
4,764
1,958
1Q
2.0
0.8
58.9
76
13.9
62.6
35.6
24.5
83.5
0.9
11.2
11.6
7.1
3.67
334
508
2Q
3,134
1,014
4,148
2,302
1,147
1,156
1,845
1,596
433
1,413
499
914
248
78
294
68
28
370
FY20
3Q
3,231
931
4,162
2,263
1,156
1,107
1,899
1,829
590
1,309
342
967
254
81
297
69
34
381
4Q
3,237
1,099
4,336
2,215
1,124
1,091
2,121
1,947
1,182
938
251
688
253
77
304
65
34
385
6,315
2,935
4Q
2.5
1.2
53.5
71
15.3
56.8
26.7
21.5
83.5
0.7
8.7
11.4
7.0
3.64
336
504
Change (%)
YoY
QoQ
8
11
8
3
7
-1
14
10
240
-38
-54
-29
8
-1
7
-4
25
8
0
18
4
-2
-3
-1
12
6
100
-28
-27
-29
0
-5
2
-6
1
1
3,158 3,545
1,570 1,615
FY18
2Q
3Q
1.8
1.9
0.9
0.9
50.3
54.4
72
73
15.4
63.7
37.5
25.9
84.6
0.9
8.8
11.4
6.5
4.2
306
507
17.4
66.0
35.4
25.7
87.3
0.9
9.3
11.3
6.4
4.1
311
530
4,100 4,451
1,553 1,634
FY19
2Q
3Q
1.8
1.9
0.7
0.7
62.1
63.3
77
77
15.7
61.9
35.7
24.3
84.3
0.9
11.1
11.1
6.6
3.83
328
541
15.3
60.7
35.6
24.2
83.2
1.0
12.6
11.3
6.7
3.8
331
505
5,232 5,520
2,379 2,608
FY20
2Q
3Q
2.1
2.2
1.0
1.0
54.5
52.8
73
72
13.9
62.0
35.3
23.2
84.5
1.0
12.3
11.5
7.1
3.67
334
499
15.0
58.7
26.1
23.2
85.5
1.0
12.7
11.5
7.1
3.7
331
501
44
14
91
13
Change (bps)
YoY
QoQ
62
31
51
13
-1,149
76
-796
-117
-88
-200
-927
-230
57
-39
-496
-22
-4
-14
3
0
30
-189
59
-177
-209
-32
-394
-15
-8
-7
5
3
23 May 2020
3
 Motilal Oswal Financial Services
DCB Bank
Management commentary highlights
COVID-19 related
Moratorium has been offered to all customers, except corporate/NBFC
customers.
Moratorium is much higher in the vehicle portfolio.
Segmental moratorium:
Home loans (52%), Business Loans – LAP (56%), MSME
(60%). Overall, 60% of the loan book is under moratorium as at end-Apr’20.
Overdue accounts (INR50m and above) worth INR893m are under the asset
classification benefit availed by the bank.
Once lock-down restrictions are eased,
loan demand may pick up slowly in 3-6
months. Smaller locations may recover sooner than metropolitan/large cities.
Near-term strategy of the bank is to
focus on preservation of balance sheet,
reducing operating expenses and maintaining high liquidity.
The bank has put limit restriction on all CC/OD facility to reduce risk.
Extension of moratorium by another three months would give breathing space
to cash-flow strained companies to revive and reorganize their business.
Government Guarantee MSME scheme
Customers are likely to face difficulty in collecting their receivables in the near
term, and thus, additional funding would be required to manage liquidity
constraints. The Government Guarantee Scheme for MSMEs is important to
help MSMEs revive and for normalcy to be restored.
Most customers in Business loans, SME, MSME and CV segments would quality
for the Government Guarantee Scheme.
The banks can charge lending rates of up to 9.25%.
Operating metrics
Fee income would decline in the near term as ATM fees, CASA related fees,
Penal charges, Processing fees and Loan attached Insurance would be
negatively impacted due to the lock-down restrictions.
NIMs trajectory would decline
due to higher slippages in 2HFY21.
Focus is on having tight control on operating expenses; variable cost is likely to
come down significantly.
Balance sheet related
Retail deposit growth remains strong and comprises ~51% of total deposits. The
bank has
re-launched a product called Zippi, which is seeing decent volumes.
During Apr-May’20, retail deposit increased by INR8b.
The bank is consciously
reducing focus on bulk CASA deposits.
Over the next few years, concentration risk of top-20 depositors is likely to come
down below 5% (v/s 9.1% as at May’20).
The bank is building a granular loan portfolio with an average ticket size of less
than INR3.5m, and thus, the exposure of top-20 advances forms ~5.3%.
The bank has reduced TD rates by more than 100bp over the past few months.
Despite cutting TD rates, retail deposit growth has stood strong.
Customer profile of MSME segment is similar to business loan (LAP) customers.
Agri, retail and tractor business is likely to revive faster.
23 May 2020
4
 Motilal Oswal Financial Services
DCB Bank
The bank has
no plans to raise capital in the near term
as loan growth is
expected to remain muted during 1HFY21.
PSLC fee income during FY20 stood at INR400m v/s INR280m in FY19.
Customer profile:
At least 80% are self-employed across business segments.
Asset quality related
The bank has a floating provision buffer of INR1b.
DCCB would continue making higher provisions than required in the near term.
SMA 0/1/2 for self-employed customers is always higher than salaried
customers due to cash flow differences.
CV segment is likely to face higher delinquency in the near term.
One time restructured book:
CV (NR1.3b), MSME (INR430m), Mortgage
(INR430) and Corporate (INR100m).
FTB & Small operators (3-4 vehicles) are the key customer segments in CV book.
Provisions break-up for 4QFY20:
NPA and ageing related provisions (INR450m),
COVID related accounts where asset classification benefit was not availed
(INR540m), COVID related accounts where asset classification benefit was
availed (INR90m), Floating provisions (INR30m), Standard asset provisions
(INR100m) and Security Receipts’ provision reversals (INR30m).
Exhibit 1: Segment-wise GNPA break-up – GNPA increased in Mortgages, SME/MSMME and CV segments
CV/STVL
Corporate
SME + MSME
Mortgages
AIB
Gold loan
Others
Total GNPAs
1QFY19
319
902
339
1,480
734
106
126
4,006
2QFY19
294
930
380
1,486
763
102
145
4,100
3QFY19
385
779
403
1,606
1,018
101
159
4,451
4QFY19
480
619
425
1,627
984
84
176
4,395
1QFY20
635
187
501
1,779
1,261
89
312
4,764
2QFY20
757
187
742
2,016
1,061
121
348
5,232
3QFY20
1,002
481
662
1,814
1,112
124
325
5,520
4QFY20
1,163
515
733
2,283
1,212
69
340
6.315
YoY (%)
142%
-17%
72%
40%
23%
-18%
93%
44%
QoQ (%)
16%
7%
11%
26%
9%
-44%
5%
14%
Valuation view
The impact of COVID-19 would have a severe impact across multiple segments
due to the contagion effect. We expect potential increase in delinquencies in
the MSME/LAP and CV portfolio. Furthermore, concerns related to asset quality
challenges in the corporate portfolio still continue.
Business growth moderated for the bank led by continued sluggishness in the
corporate banking/SME/MSME portfolio. The bank indicated nil disbursements
during the lockdown period and expects weak business growth trends over the
next few quarters. We, thus, expect loan growth at 9% CAGR over FY20-FY22E.
Overall, this would result in moderation in NII and fee income, dragged down by
reduced business activity. Thus, we expect PPoP growth to moderate to 6%
CAGR over FY20-22E.
Neutral with a target price of INR70:
DCB reported moderation in 4QFY20 business
growth, reflecting the challenging macro environment. The bank expects business
trends to remain weak as focus in the near-term is on preservation of balance sheet
and risk reduction. We also remain watchful of asset quality as ~60% of the bank’s
loan portfolio has availed moratorium. With the recent extension of moratorium for
another three months, we expect the proportion of borrowers availing moratorium
23 May 2020
5
 Motilal Oswal Financial Services
DCB Bank
to increase further as economic activity is still at a nascent stage of recovery and
borrowers would need more time to recuperate from the COVID-19 crisis. We, thus,
expect credit cost trends to remain elevated in the near term, and therefore, cut our
PAT estimates for FY21/FY22E by 27%/29%. We estimate DCBB to deliver FY22E
RoA/RoE at 0.8%/9.1%. Maintain
Neutral
with a revised TP of INR70 (0.6x FY22E
ABV).
Exhibit 2: We cut our FY21/22E PAT estimates by 8%/6% as we factor in higher credit cost and moderate business growth
trend
(INR b)
NII
Other Income
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
Loans
Deposits
Margins (%)
Credit Cost (%)
RoA (%)
RoE (%)
BV
ABV
EPS
Old Estimates
FY21
FY22
13.6
15.2
4.2
4.8
17.8
20.0
9.9
10.8
7.9
9.1
3.7
3.0
4.3
6.1
1.1
1.5
3.2
4.5
276
312
334
381
3.7
3.6
1.4
1.0
0.8
1.0
9.6
12.2
117
131
108
123
10
15
Revised Estimates
FY21
FY22
13.5
14.5
4.2
4.5
17.6
19.0
9.7
10.6
7.9
8.4
4.8
4.1
3.1
4.3
0.8
1.1
2.3
3.2
274
301
325
357
3.7
3.7
1.8
1.4
0.6
0.8
7.1
9.1
113
123
99
108
8
10
Change (%/bps)
FY21
FY22
-1.2
-4.4
-0.8
-5.1
-1.1
-4.6
-2.0
-2.0
-0.1
-7.7
31.2
34.7
-26.8
-29.0
-26.8
-29.0
-26.8
-29.0
-0.9
-3.5
-2.7
-6.1
3
6
44
39
-20
-26
-244
-314
-3.1
-6.0
-8.7
-12.3
-27.0
-29.2
Exhibit 3: One-year forward P/B
P/B (x)
Min (x)
2.6
2.2
1.9
1.9
1.5
1.2
1.1
0.6
0.5
0.6
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 4: One-year forward P/E
P/E (x)
45.0
35.0
25.0
15.7
15.0
9.0
5.0
6.2
6.2
22.5
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
38.9
Source: MOFSL, Company
Source: MOFSL, Company
23 May 2020
6
 Motilal Oswal Financial Services
DCB Bank
Story in Charts
Exhibit 1: Loan growth moderated to 8% YoY
Loan (INR b)
Growth YoY %
31
27
Exhibit 2: Proportion of corporate advances stable at 12%
Mortgages
Others
15 16
17 17
11 11
3 3
CV/CE/STVL
SME/MSME
PL
AIB
Gold Loan
Corporate
12 12
21 21
11 11
6 5
28
29
24 22 22
20
28 29
23
16
13 12
11
8
16 16 15 17
17 18 17 17
11 12 11 12
2 3 6
5
17 17 17 15 15 13 13 12
17
18 18
19 19 20 20 20
12
12 12
12 12 12 12 12
5
5 5
5 5
6 6 6
44
43
44 43 44 42 42 40 40 40 40 40 40 41 41 42
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 3: Share of retail deposits moderated to 78%
Retail dep share (%)
32
25
19
23
20
16
10
14
5
23 24
20
Retail Deposit gr
29
26 24
19
Exhibit 4: CASA ratio declined to 21.5%
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 5: CASA mobilization per branch (one-year lag)
declined to INR196m
CASA per branch (1yr Lag) - INR m
285
260
235
210
Exhibit 6: PCR (incl. TWO) declined to ~71%
Gross NPA%
Net NPA %
79
77 77
76 76
76
73
72
75 75 75
74
73
72
72
71
185
Source: MOFSL, Company
Source: MOFSL, Company
23 May 2020
7
 Motilal Oswal Financial Services
DCB Bank
Story in charts
Exhibit 7: Reported NIM declined to 3.64%
Exhibit 8: Fee income to assets remains stable at 0.7%
Fee Income (INR m)
Fee Income to avg assets (%)
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 9: Opex growth lagged total income growth
Total Income Growth (%)
34
32
27
33
17 25
Opex Growth (%)
Exhibit 10:
Cost to income improved ~330bp QoQ to 51.1%
Cost to Income Ratio (%)
27
23
27
24
26 25
19
23
23
23
12
17
11
19
13
15
10
4
6
5
17
7
10
6
8
3
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 11: DuPont Analysis – Return ratios to remain under pressure in the medium term
DCB Bank
Interest Income
Interest Expended
Net interest Income
Fee income
Trading and others
Non-interest Income
Total Income
Operating expenses
Employees
Others
Operating profits
Core PPP
Provisions
NPA
Others
PBT
Tax
ROAA (%)
Leverage (x)
ROAE (%)
FY16
9.64
6.12
3.51
0.80
0.45
1.25
4.77
2.79
1.39
1.39
1.98
1.53
0.50
0.37
0.13
1.48
0.38
1.10
10.60
11.70
FY17
9.62
5.93
3.69
0.77
0.39
1.16
4.85
2.91
1.43
1.48
1.94
1.55
0.52
0.44
0.08
1.42
0.50
0.93
11.71
10.83
FY18
8.89
5.22
3.67
0.98
0.17
1.14
4.81
2.88
1.40
1.47
1.93
1.77
0.51
0.41
0.10
1.42
0.52
0.90
12.05
10.89
FY19
9.21
5.73
3.48
0.94
0.12
1.06
4.54
2.58
1.31
1.27
1.96
1.84
0.42
0.06
0.36
1.53
0.55
0.99
12.17
11.99
FY20
9.52
6.12
3.41
0.90
0.15
1.05
4.46
2.43
1.24
1.20
2.03
1.87
0.70
0.70
0.00
1.32
0.41
0.91
12.28
11.18
FY21E
9.14
5.74
3.40
0.90
0.15
1.05
4.45
2.45
1.24
1.21
2.00
1.86
1.21
1.20
0.02
0.79
0.20
0.59
12.06
7.13
FY22E
9.01
5.61
3.40
0.91
0.15
1.06
4.46
2.49
1.25
1.24
1.97
1.82
0.96
0.94
0.02
1.01
0.25
0.76
12.02
9.08
23 May 2020
8
 Motilal Oswal Financial Services
DCB Bank
Financials and Valuations
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Growth (%)
Non-Interest Income
Total Income
Growth (%)
Operating Expenses
Pre Provision Profits
Growth (%)
Core PPP
Growth (%)
Provisions (excl. tax)
PBT
Tax
PAT
Growth (%)
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Deposits
Growth (%)
of which CASA Dep
Growth (%)
Borrowings
Total Liabilities
Current Assets
Investments
Loans
Growth (%)
Fixed Assets
Total Assets
ASSET QUALITY
GNPA (INR M)
NNPA (INR M)
GNPA Ratio
NNPA Ratio
Slippage Ratio
Credit Cost
PCR (Excl. Tech. write off)
FY15
14,224
9,142
5,082
38.0
1,657
6,739
32.9
3,965
2,774
47.6
2,408
49.7
694
2,080
168
1,912
26.2
FY16
16,985
10,790
6,195
21.9
2,205
8,400
24.6
4,909
3,490
25.8
2,971
23.4
879
2,611
666
1,945
1.7
FY17
20,762
12,791
7,971
28.7
2,488
10,459
24.5
6,277
4,182
19.8
3,630
22.2
1,115
3,067
1,070
1,997
2.7
FY18
24,130
14,176
9,954
24.9
3,103
13,057
24.8
7,807
5,250
25.5
4,796
32.1
1,388
3,862
1,409
2,453
22.8
FY19
30,415
18,922
11,493
15.5
3,502
14,994
14.8
8,529
6,466
23.2
6,080
26.8
1,401
5,065
1,812
3,254
32.7
FY20
35,366
22,717
12,649
10.1
3,911
16,560
10.4
9,030
7,531
16.5
6,959
14.5
2,612
4,919
1,540
3,379
3.9
FY21E
36,230
22,749
13,482
6.6
4,165
17,647
6.6
9,706
7,941
5.4
7,359
5.7
4,805
3,135
790
2,345
-30.6
INR m
FY22E
38,454
23,950
14,504
7.6
4,540
19,044
7.9
10,627
8,417
6.0
7,774
5.6
4,106
4,311
1,086
3,224
37.5
FY15
2,820
13,034
15,854
126,091
22.1
29,501
14.3
11,670
161,323
7,192
39,622
104,651
28.6
2,367
161,323
FY16
2,844
15,062
17,906
149,260
18.4
34,899
18.3
11,494
191,185
8,916
43,333
129,214
23.5
2,480
191,185
FY17
2,854
19,179
22,033
192,892
29.2
46,892
34.4
12,774
240,464
11,925
58,179
158,176
22.4
4,886
240,464
FY18
3,081
24,983
28,064
240,069
24.5
58,403
24.5
19,267
302,207
23,720
62,190
203,367
28.6
4,940
302,222
FY19
3,095
28,049
31,144
284,351
18.4
68,099
16.6
27,232
357,907
27,934
78,442
235,680
15.9
5,260
357,918
FY20
3,104
31,117
34,222
303,699
6.8
71,066
4.4
34,080
385,051
35,459
77,415
253,453
7.5
5,459
385,051
FY21E
3,104
33,307
36,412
324,958
7.0
79,615
12.0
32,641
407,715
28,966
84,382
273,729
8.0
5,732
407,715
FY22E
3,104
36,377
39,481
357,454
10.0
91,866
15.4
34,188
445,511
31,723
90,289
301,102
10.0
6,018
445,511
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
3,690
1,467
1.8
0.7
1.93
0.77
60.1
4,395
1,538
1.8
0.65
1.92
0.64
65.0
6,315
2,935
2.5
1.16
2.72
1.07
53.5
12,493
6,331
4.5
2.31
4.50
1.82
49.3
13,382
6,466
4.3
2.15
2.70
1.43
51.7
23 May 2020
9
 Motilal Oswal Financial Services
DCB Bank
Financials and Valuations
Ratios
Y/E March
Yield and Cost Ratios (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liabilities
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
CAR
Tier I
Tier II
Business & Efficiency Ratio (%)
Loans/Deposit Ratio
CASA Ratio
Cost/Assets
Cost/Income
Cost/ Core Income
Int. Expense/Int. Income
Fee Income/Net Income
Non Int. Inc./Net Income
Emp. Cost/Op. Exp.
Investment/Deposit Ratio
Profitability and Valuations Ratios
RoE
RoA
RoRWA
Book Value (INR)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Price-Earnings (x)
FY15
10.9
11.8
7.2
7.3
7.3
3.6
3.89
FY16
10.6
11.6
7.4
7.2
7.3
3.4
3.88
FY17
10.5
11.5
7.8
7.0
6.9
3.6
4.04
FY18
9.3
10.7
7.0
6.1
6.0
3.2
4.0
FY19
9.6
11.2
7.6
6.6
6.5
3.0
3.8
FY20
10.0
11.6
8.0
7.0
6.6
3.0
3.7
FY21E
9.6
11.1
7.2
6.5
6.4
3.1
3.7
FY22E
9.5
10.9
7.0
6.4
6.3
3.1
3.7
15.0
14.2
0.7
14.1
12.8
1.3
13.8
11.9
1.9
16.5
12.7
3.8
16.8
13.1
3.7
17.8
13.9
3.9
16.8
13.6
3.2
16.3
13.3
2.9
83.0
23.4
2.7
58.8
61.4
64.3
20.5
24.6
49.4
27.6
86.6
23.4
2.8
58.4
61.5
63.5
21.2
26.2
49.9
26.7
82.0
24.3
2.9
60.0
62.7
61.6
19.5
23.8
49.0
24.7
84.7
24.3
2.9
59.8
61.9
58.7
20.3
23.8
48.8
25.9
82.9
23.9
2.6
56.9
58.4
62.2
20.8
23.4
50.9
27.6
83.5
23.4
2.4
54.5
56.5
64.2
20.2
23.6
50.8
25.5
84.2
24.5
2.4
55.0
56.9
62.8
20.3
23.6
50.6
26.0
84.2
25.7
2.5
55.8
57.8
62.3
20.5
23.8
50.4
25.3
14.4
1.3
1.8
56.3
1.1
53.7
1.1
6.8
8.9
11.8
1.1
1.4
62.0
1.0
59.6
1.0
6.8
8.8
10.8
0.9
1.2
72.3
0.8
69.3
0.9
7.0
8.6
10.9
0.90
1.2
86.7
0.7
83.3
0.7
8.0
7.6
12.0
0.99
1.5
96.3
0.6
92.8
0.7
10.5
5.8
11.2
0.91
1.4
105.9
0.6
99.3
0.6
10.9
5.6
7.1
0.6
0.9
113.0
0.5
99
0.6
7.6
8.0
9.1
0.8
1.1
122.9
0.5
108
0.6
10.4
5.8
23 May 2020
10
 Motilal Oswal Financial Services
DCB Bank
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
23 May 2020
11
 Motilal Oswal Financial Services
DCB Bank
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on
the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL
even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
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