DCB to use Rs 81cr QIP proceed on mortgage biz, SME

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DCB to use Rs 81cr QIP proceed on mortgage biz, SME

In an interview with CNBC-TV18, Murali M Natrajan, MD and CEO of DCB spoke about the company’s recent funding raising activity and the road ahead.

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In an interview with CNBC-TV18, Murali M Natrajan, Managing Director and CEO of Development Credit Bank (DCB) spoke about the company's recent fund raising initiative and the road ahead.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Could you give us some more details - you raised about Rs 81 crore we believe in the QIP? Is that all you wanted to raise or a little bit more on that?
A: Our target was actually to raise between Rs 50-70 crore and we are quite happy that we were able to raise Rs 81 crore. Our target was also to look for long-term investors who will work alongside the promoter because over the period of next 3-4 years we need to bring the promoter - Aga Khan Fund for Economic Development (AKFED) - holding to 10%. So all in all it has been a very satisfactory kind of initiative that we had been able to conclude at this point.

Q: I understand that your capital adequacy ratio has gone up to nearly 16%. But would you want to raise some more equity capital through a rights kind of an offering?

A: As of September 2009, our capital adequacy was at 15.9% with tier I at 12.4%. We did have adequate capital. As we put together plans for growing our asset balance sheet, we think that by April or so there will be strong traction in our growth and that is the reason we raised capital. The next time we raise capital is when we see performance for another 2-3 quarters is what I expect.

Q: So it is unlikely that these rights will go through in this financial year?

A: I am unable to comment on that at this point of time. All the initiatives we have taken to grow the balance sheet - take its effect for the next two quarters and then decide the progress on that.

Q: Can you walk us through how exactly this Rs 80 crore will be pumped back into the balance sheet? Where does it primarily go towards?

A: The key areas for growth that we have put together - one is retail mortgages, second is micro SME, third is SME, fourth is mid-corporate and fifth is priority sector lending. Part of this capital will go towards long-term funding of our mortgage business. But all in all we expect the balance sheet in next three years to be 33% in retail, 33% to be in SME and micro SME and 33% in corporate and priority sector lending, so that is how we plan to utilize this capital.

Q: How far is the clean up progressed? You have been trying to clean up your legacy issues of non-performing assets (NPA). By which quarter do you think that will be a story of the past and actually start growing your balance sheet again?

A: Let me deal with the growing of the balance sheet and NPAs as two separate items to answer. If you see the rate at which the NPAs had grown from last year March to this year, that is, the last financial year, it was pretty high. But if you see the rate at which the NPAs have increased in the last six-months, we definitely see an improvement both in the retail area and in the corporate area. We see month-on-month improvement in the retail portfolio. We are actually seeing some amount of recoveries coming through in corporate NPA as well. So our target is to put this problem behind us in 6-9 months and we are confident that that could be achieved.

On growth because we have started shrinking our unsecured personal loans for the last 12-months or so and also couple of select portfolios, we expect that even by end of this year, our asset would be stable at the current level or maybe grow marginally. But our ambition is to double our balance sheet in 3-4 years.

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