DCB Bank has been promoted by the Aga Khan Fund for Economic Development and the Platinum Jubilee Investments Ltd holding a combined shareholding equity of 14.77%. Foreign Financial Institutions and Foreign Portfolio Investors hold up to 42.41% while the balance is spread across the public and other non-promoter entities like Mutual Funds.
It is a new-generation private sector bank spread across 442 branches in 20 States and 2 Union Territories in the country. DCB bank has been primarily working in the mortgage, MSME / SME, agri, and gold loan areas with small ticket lending as its core focus. As per the annual report 2023 of the government of India, Ministry of Micro, Small and Medium Enterprises, the MSME / SME sector plays a pivotal role in the economic and social development of the country.
The aforesaid sector contributes around 29% to the Indian GDP and 44% to the merchandise exports. The business strategy of DCB Bank is to target the self-employed and the MSME / SME in the retail segment. Within this segment, its focus is in the areas of tractor finance, gold loans, and construction finance particularly in the Tier 2 to Tier 6 locations thereby creating a diversified, secured, and granular portfolio. DCB Bank has a capital-efficient business model with the potential to deliver healthy Returns on Asset and Returns on Equity over the next few years.
Deposit and Advances stand at Rs 63037 crores as of 31 March 2024 with an aim to double the balance sheet every four years. DCB Bank posted a strong financial quarter of Q4FY2024 with a better Net Interest Income ( NIM ) and fees driven on the back of a reduction in slippages. NIM which had fallen sharply in Q3FY2024 to 3.48% got normalised to 3.62% due to a better loan mix, collection efficiency, liquidity management, and repricing of loans. The 14 basis points increase in margins was due to rise in credit and investment yield and fall in GNPA and a change in the loan mix with more focus on LAP vs home loans within the mortgage portfolio.
Plus few elements of fixed-rate loans got switched to floating rates, thereby giving the bank a decent fee income. Generally, the fixed loan option is largely preferred in the commercial vehicles segment. Fee income profile too improved on a year-on-year basis in FY24 with PSLC income being substituted by core fees. Analysts tracking the company expect deposit accretion to outpace loan growth and are factoring over 18% CAGR in the loans and deposit segment over the next three years .
Asset-liability management has been efficient with LCR at 125% and LDR at 83% indicating a positive growth path. DCB Bank aims to improve the CASA, diversify the advanced portfolio, contain the non-performing assets, and also improve the margin of safety through higher operating profit and provisioning along with improving ROE and ROA in the near term. The DCB Bank stock has been holding steady on the bourses at around Rs 120 odd levels over the last many months.
It has finally crossed the Rs 136 level and is quoting at around Rs 139. Fund managers and analysts tracking the company expect it to appreciate to Rs 185 levels in the next 8-9 months time frame. Portfolio investors can accumulate it for decent medium-term gains.