Development Credit Bank-Seriously, Under-Valued? This stock should be worth Rs 200 per share in a year from now.
The industrial big-wigs have been making a bee-line to the RBI offices in search of a Banking licence. Such is the perceived value of a licence that Hire Purchase/Lease Finance companies like Shriram Transport, Sundaram Finance, Mannapuram, Moongipa and Bajaj Auto Finance have seen a run-up in their stocks just on the belief that they will get a Banking licence.
On the flip side we have DCB-at Rs 6400 crore in deposits-a private sector bank right in front of our eyes which is worth just Rs 1200 crore at today's market price. The Bank has got 80 CBS branches and runs a market cap of Rs 1200 crore, while Kotak with 250 branches carries a market cap of Rs 37000 crore, and IndusInd with 250 branches carries a market cap of Rs 13000 crore.
A. If this yardstick is used for DCB-the bank should be worth at least 4160 crore or nearly three times today's CMP of Rs 61.
B.What stands in-between market outperformance for DCB? The basics-first...
Emerging Private Sector bank with a balance sheet size of approximately Rs. 6400 crores. Network of 80 state-of-the-art branches, with access to more than 18,000* ATMs spread across the states of Maharashtra, Gujarat, Andhra Pradesh, Karnataka, New Delhi, Goa, Tamil Nadu, Haryana, West Bengal, Rajasthan, Union Territories of Daman & Diu and Dadra & Nagar Haveli. Dedicated staff of over 1800. The recently launched Initial Public Offering enjoyed a phenomenal success, being oversubscribed 35 times
C. Can the management team effect a turnaround? Already on the way...
Mr. Murali M. Natrajan – Managing Director & Chief Executive Officer (CEO)
Prior to joining DCB, Mr. Natrajan served as the Global Head for SME banking in Standard Chartered Bank. He was responsible for providing strategic context and business development capabilities to drive a distinctive and consistent business model across 27 markets in Asia, Africa and the Middle East. Mr. Natrajan joined Standard Chartered Bank, India to head the Mortgage & Auto Business. In November 2004, he was promoted as Head of Consumer Banking for India & Nepal overseeing business that include Mortgages, Wealth Management, Branches, ATMs, Credit Cards, Personal Loans and SME.
A Fellow Member of the Institute of Chartered Accountants of India, Mr Natrajan started his career with American Express TRS in India where he worked for 5 years in Business Planning, Finance and Operations. In 1989, he joined Citibank where he spent 14 years in various disciplines such as Operations, Credit, Finance, Product Management and Business Management of Consumer Banking. Prior to joining Standard Chartered Bank in October 2002, he had successful stints as Cards Business Director in Citibank India, Hong Kong and Indonesia.
Mr. Anoop Prabhakar – Head – Corporate Banking
Mr. Prabhakar is an M Sc (Physics) from Delhi University and comes with 32 years of in-depth banking experience in Corporate & Retail Banking, Business Process Re-engineering, Stressed Assets Recovery and International Banking which also includes an international assignment of 3 years in the UK. In his last role, he was working as General Manager – Local Head Office (Chennai) at State Bank of India and was responsible for management of an extensive network of branches across Tamil Nadu and Pondicherry.
Mr. Bharat Sampat – Chief Financial Officer (CFO)
Chartered Accountant and Cost Accountant alongwith a Post Graduate Degree in Law, Mr. Sampat has over 24 years of experience in senior positions with reputed organizations such as ABN Amro Bank, ANZ Grindlays Bank, Standard Chartered Bank, Hoechst India and Larsen & Toubro. He has worked in diverse industries such as manufacturing, banking, finance and shared services with oversight for financial accounting, financial control and reporting, and management accounting both in India and abroad.
Mr. Praveen Kutty – Head – Retail & SME Banking
Mr. Kutty brings with him around 16 years of banking experience. He has worked with Citibank's Indian and international operations where he successfully managed multiple consumer banking businesses including Credit Cards, Personal Loans, Home Loans, Branch Banking and Wealth Management. As Area Director for Bangalore for Consumer Banking, he was instrumental in scaling up the remote banking Suvidha experiment into a highly profitable customer proposition. Prior to joining DCB, he was the Area Director for Citibank's NRI Business in North America. Mr. Kutty holds a B.Com and an MBA degree.
Mr. R. Venkattesh – Head – Operations, Technology & HR
Mr. Venkattesh holds a B.Com. degree and is an MBA in Personnel Management. Prior to joining the Bank, he was with Standard Chartered Bank as Head, Human Resources - Countries. He has over 18 years of experience in the areas of Human Resource Management and Mergers and Acquisitions.
Mr. Rajesh Verma – Head – Treasury
Mr. Verma comes with 29 years of experience within Banking & Investment Banking in State Bank of India. His rich experience spans across the various functions of Treasury, Credit, Loan Syndications, Project Finance, Investment Banking, General Administrations and IT Project Management in India and UK. In his last role, he was working as a Deputy General Manager, Global Market Department for SBI in Mumbai.
Mr. Ravi Kumar - Chief Internal Auditor
Mr. Ravi has over 15 years of rich experience in a career that spans national as well as international roles. Prior to DCB, he spent seven years with the Samba Financial Group (previously Citibank) and four year with Ernst & Young at Riyadh. In his last role, he was Chief Financial Officer with Samba Financial Group, Qatar. Ravi is a Chartered accountant and a Certified Information Systems Auditor as well. He has managed and led several audits across various functions and domains. He brings with him an in-depth understanding of the banking domain and its nuances. In this role he is focused on strengthening the audit function in the Bank and taking it to the next level.
D. Who owns the Bank?
DCB made a Preferential Allotment of Rs.280 crores at a price of Rs.105 per share to a group of pedigree investors, namely: - Al Bateen Investment Company, LLP, Abu Dhabi, UAE
- Tata Capital Limited, Mumbai, India
- Tata Investment Corporation Limited, Mumbai, India
- DCB Investments Limited, Mauritius
- GRA Finance Corporation Limited, Mauritius (Lehman Brothers)
- India Capital Opportunities 1 Limited, Mauritius (Mark Faber).
Pursuant to this capital raising, DCB's Share Capital has increased to Rs. 174 crores and the Net Worth now stands at Rs.575 crores as opposed to the regulatory minimum of Rs.300 crores.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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