Current price 114.35

Sector BANKING

No of shares 281493393

52 week high 127.00

52 week low 59.00

BSE Sensex 28260.14

Nifty 8586.25

Average Volume1234642

BSE Code 532772

NSE Symbol DCBBANK

Recommendation

– BUY/HOLD

Date – 01/04/2015

DCB Bank Ltd.

Company Overview

Development Credit Bank is one of the emerging private sector banks in India. Their network spread over 10

states and 2 union territories namely of Maharashtra, Gujarat, Andhra Pradesh, Karnataka, New Delhi,

Rajasthan, Goa, Tamil Nadu, Haryana, West Bengal, Daman and Diu, and Dadra and Nagar Haveli. The Bank

operates in four business segments, namely treasury operations, corporate, retail and other banking

operations. Development Credit Bank was started as a Credit Society in the 1930s. Eventually, Diamond

Jubilee Co-operative Bank Ltd merged with Ismailia Co-operative Bank Ltd. In the year 1981, Ismailia Co-

operative Bank Ltd was amalgamated with Masalawalla Co-operative Bank Ltd to form the Development Co-

operative Bank Ltd. Later, Citi Cooperative Bank Ltd merged with Development Co-operative Bank Ltd. In the

year 1995, Development Co-operative Bank Ltd was converted into Development Credit Bank Ltd.

DCB Bank is a modern emerging new generation private sector bank with 134 plus branches across 17 states

and 2 union territories. Which resulting in sticky customer deposits from traditional customers. New branch

expansions in Madhya Pradesh, Odisha, Punjab, Rajasthan. It is a scheduled commercial bank regulated by

the Reserve Bank of India. It is professionally managed and governed. DCB Bank has contemporary

technology and infrastructure including state of the art internet banking for personal as well as business

banking customers. DCB Bank’s business segments are retail, micro-SMEs, SMEs, mid-Corporate,

Agriculture, commodities, government, PSUs, Indian banks, co-operative banks and Non- Banking Finance

Companies (NBFCs). The bank has Comprehensive range of banking products across all businesses.

Management continued to maintain a cautious stance on MSME book due to stress in this segment.

DCB reshaped its strategy of refocusing on small-ticket loans. The bank continued to build granularity in loan

book by focusing on secured lending like mortgages and reduced lumpy exposures. Going ahead, DCB to

further double its balance sheet in the next three years in sync with management guidance. The current

market capitalisation stands at Rs 3,178.28 crore.

Category No. of Shares Percentage

Promoters 2,450,182 0.98

General Public 75,599,178 30.15

Foreign Promoters 43,750,052 17.45

Foreign Institutions 37,219,787 14.84

Other Companies 30,552,076 12.18

NBFC and Mutual

Funds25,280,158 10.08

Financial Institutions 15,717,856 6.27

Foreign - OCB 11,745,484 4.68

Foreign - NRI 6,481,431 2.58

Others 1,518,232 0.61

Directors 459,786 0.18

Market Cap (Rs Cr) – 3186.74

Company P/E (x) – 19.06

Industry P/E (x) – 23.04

Book Value (Rs) – 41.94

Price / BV (x) – 2.69

Dividend (%) – Nil

EPS (TTM) – 5.93

Dividend Yield (%) – Nil

Face Value (Rs) – 10

Share Holding Pattern Financial Details

Industry Overview

The banking sector in India is on a growing trend. It has vastly benefitted from the surge in disposable income

of individuals in the country. There has also been a noticeable upsurge in transactions through ATMs, and also

internet and mobile banking. Consequently, the different banks, viz public, private and foreign banks have

invested considerably to increase their banking network and thus, their customer reach.The Indian banking

sector is fragmented, with 46 commercial banks jostling for business with dozens of foreign banks as well as

rural and co-operative lenders.

Indian banking industry, with total asset size of Rs 81 trillion (USD 1.34 trillion), is expanding continuously but

on a cautious note. The fact that the industry is plagued by bad loans, the lenders have chosen to go slow in

terms of credit off take. Fiscal 2014 saw a combination of various external and internal events that kept

markets turbulent, interest rates high and investor confidence low, resulting in shrinking investment and GDP

growth.

Total banking sector credit is anticipated to grow at a CAGR of 18.1 per cent to reach US$ 2.4 trillion by 2017.

The total banking assets in India touched US$ 1.8 trillion in FY13 and are anticipated to cross US$ 28.5 trillion

in FY25. To help Micro Small and Medium Enterprises (MSME), RBI has permitted setting up of an exchange-

based trading platform to facilitate financing of bills raised by such small entities to corporate and other

buyers, including government departments and PSUs. Powered by an economy which is slated to grow at 7%

to 9% and the fact that India is under-penetrated in Banking. This industry is also expected to have a healthy

growth of over 15% in the next 3 to 4 years.

With the advancements in technology, mobile and internet banking services have come to the fore. Banks in

India are focusing more and more to provide better services to their clients and have also started upgrading

their technology infrastructure, which can help improve customer experience as well as give banks a

competitive edge.

Balance Sheet

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Capital and Liabilities:

Total Share Capital 250.32 250.11 240.67 200.17 199.99

Equity Share Capital 250.32 250.11 240.67 200.17 199.99

Share Application Money 2.96 3.02 2.82 2.81 2.12

Reserves 900.67 749.93 562.91 362.35 340.34

Net Worth 1,153.95 1,003.06 806.40 565.33 542.45

Deposits 10,325.16 8,363.84 6,335.56 5,610.17 4,787.33

Borrowings 860.16 1,525.62 1,123.45 860.72 503.51

Total Debt 11,185.32 9,889.46 7,459.01 6,470.89 5,290.84

Other Liabilities & Provisions 583.86 386.31 356.48 279.97 244.72

Total Liabilities 12,923.13 11,278.83 8,621.89 7,316.19 6,078.01

Assets

Cash & Balances with RBI 505.07 378.77 407.50 404.51 291.36

Balance with Banks, Money at Call 184.50 504.49 49.05 82.60 40.98

Advances 8,140.19 6,586.09 5,284.42 4,271.45 3,459.71

Investments 3,634.22 3,358.66 2,517.76 2,295.04 2,017.93

Gross Block 238.64 236.09 215.38 205.68 204.07

Revaluation Reserves 0.00 0.00 54.97 56.15 58.65

Accumulated Depreciation 0.00 0.00 89.50 78.18 68.31

Net Block 238.64 236.09 70.91 71.35 77.11

Capital Work In Progress 0.00 3.36 58.76 0.00 0.00

Other Assets 220.51 211.38 233.47 191.23 190.92

Total Assets 12,923.13 11,278.84 8,621.87 7,316.18 6,078.01

Contingent Liabilities 2,951.49 4,952.24 3,080.67 2,998.17 3,821.53

Bills for collection 0.00 0.00 630.58 786.00 751.01

Book Value (Rs) 45.98 39.98 33.39 28.10 27.02

Profit and Loss Account

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Income

Interest Earned 1,128.26 916.10 716.97 536.26 459.40

Other Income 138.66 117.02 102.73 112.10 107.09

Total Income 1,266.92 1,033.12 819.70 648.36 566.49

Expenditure

Interest expended 759.87 631.69 489.27 347.12 317.42

Employee Cost 157.08 137.90 124.59 106.37 88.05

Selling, Admin & Misc Expenses 180.64 147.83 138.80 160.29 224.10

Depreciation 17.97 13.64 11.97 13.15 15.38

Operating Expenses 319.09 275.30 271.21 261.89 314.33

Provisions & Contingencies 36.60 24.07 4.15 17.92 13.20

Total Expenses 1,115.56 931.06 764.63 626.93 644.95

Net Profit for the Year 151.36 102.06 55.08 21.43 -78.45

Extraordinary Items 0.00 0.00 0.00 0.00 0.00

Profit brought forward -249.47 -323.36 -364.54 -378.37 -299.89

Total -98.11 -221.30 -309.46 -356.94 -378.34

Per share data (annualised)

Earning Per Share (Rs) 6.05 4.08 2.29 1.07 -3.92

Book Value (Rs) 45.98 39.98 33.39 28.10 27.02

Appropriations

Transfer to Statutory Reserves 40.30 28.17 13.89 7.60 0.03

Transfer to Other Reserves -138.40 -249.47 -323.36 -364.55 -378.37

Balance c/f to Balance Sheet -138.41 -249.47 -323.36 -364.54 -378.37

Total -236.51 -470.77 -632.83 -721.49 -756.71

Index and Company Price Movement Comparison

Company Forecast

Symbol Value Action

RSI(14) 64.783 Buy

STOCH(9,6) 39.560 Sell

STOCHRSI(14) 38.355 Sell

MACD(12,26) 1.450 Buy

ADX(14) 59.483 Buy

Williams %R -32.967 Buy

CCI(14) 80.1133 Buy

ATR(14) 1.3964 Less Volatility

Highs/Lows(14) 0.2357 Buy

Ultimate Oscillator 53.187 Buy

ROC 1.614 Buy

Bull/Bear Power(13) 3.2340 Buy

Technical Indicators

RoE – 14.03 v/s 10.95

Net Profit Margin – 11.94 v/sw 9.87

Return on net worth – 13.15 v/s 10.20

Reserves – 900.67 cr v/s 749.93 cr

PAT – 151.36 cr v/s 102.06

Total assets – 12923.13 cr v/s 11278.84 cr

Interest earned – 1128.26 cr v/s 916.10 cr

EBIT – 205.94 cr v/s 139.77 cr

OPM – 5.96 v/s 2.48

Book Value – 45.98 v/s 39.98

Important Ratios (YoY)

Days BSE NSE

30 109.78 109.76

50 112.42 112.40

150 102.89 102.91

200 97.04 97.0

Simple Moving Average

Investment Rationalize

DCB Bank is one of the fastest growing private sector banks in India with more than 140 branches spread over 17 states with a

growth oriented and low risk business model.

Gross NPAs decreased by Rs.77 crore and the overall NPA coverage ratio was 81%. Gross NPAs have decreased to

Rs.138.45 crore as on 31st March, 2014 from Rs.214.98 crore as on 31st March 2013. The overall NPA Provision Coverage

Ratio as on 31st March, 2014 was 80.54%.

The Bank has posted and Operating Profi t of Rs.187.96 crore (previous year Rs.126.13 crore) and a Net Profit of Rs.151.36

crore (previous year Rs.102.06 crore).

The Bank’s target market is the self-employed segment (traders, shop keepers, small businessmen, MSMEs and SMEs).

MSME / SME sector plays a very important role in the growth of the Indian economy. It is estimated that MSME / SME contribute

17% to GDP and employs over 70 mn people in about 30 mn units. Further, MSME / SME is estimated to contribute 45% of

India’s industrial output and 40% of export which provides a huge growth potential.

Bank is expanding at a fast pace i.e. 25-30 new branches in every year which allows the company to tap the growth potential

not only in cities but also in tier 2 – tier 6 locations.

Bank has been able to sustain the growth even in the adverse market conditions and its gives an idea about the banks growth

potential when the economic condition improves.

RBI measures non cutting interest rates and governments emphasis on “Make in India” and development measures towards

SME/MSME will add to the profits of the bank.

Allied financial services such as Insurance, Portfolio Management services, Foreign Exchange and Trade Finance Business –

East Africa will add to the profits of the company.