Buy Dhanlaxmi Bank for long term: SP Tulsian

Buy Dhanlaxmi Bank for long term with a target of Rs 75, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Dhanlaxmi Bank is a very interesting story. First I take a valuation per branch at about less than Rs 2 crore. They have a strong presence in four southern states plus Maharashtra, you can call them as a five centric bank with about 268 branches and 400 ATMs."
He further added, "If you take a valuation right now of the market cap, the valuation works out at about less than Rs 2 crore per branch and if I make a comparable analysis with Development Credit Bank or Karnataka Bank because all of them are with a buzz that they are all seen as a takeover candidate whether you talk of DCB or Karnataka Bank or Dhanlaxmi Bank may be in next 6-12 months because we keep hearing the news that so and so bank is in race to acquire one of these three banks. So I am taking more valuation call on per branch net worth which is at less than Rs 2 crore."
"Even if I go by the book value, it is close to about Rs 85-86 as on 30th September. If I see the financial performance, I am not saying that financial performance is very good but for H1 their net loss is close to about Rs 30 crore which was at about Rs 115 crore for whole of FY12. And even if I take at the operating profit level, in the first half of FY13 company had posted an operating profit of about Rs 2 crore, while the operating loss was at Rs 90 crore for whole of FY12. So definitely things are improving."
"The problem with the bank is that in the last 15-18 months they have not added any single branch because of funds or because of some problems they had at their management level. And that also seems to be a point that we may expect to see some hand change because there are no defined promoters, 65 percent of the stake is held by the institutional investors, HNIs and all."
"If you really go by the deposit advances also, advances are also stagnant at sub Rs 11000 while the deposits are at sub Rs 8000. So definitely some kicker is required which can only come in the form of a new strategic investor. In fact we have been hearing talk that an NBFC of an engineering or cap goods company is into the race to acquire stake in the bank for which serious talks are happening. So taking an overall call I see very limited downside in the stock. This is not for the near term investors or those who have a trading view. Those who can have a view of about one year can buy and look for a target of Rs 75 or so." Disclosure: I have holdings in Dhanlaxmi Bank.