Sell DCB Bank; target of Rs 90: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on DCB BankDCB Bank is a new private sector bank based in Mumbai, with presence across Retail, MSME, Agri and Corporate banking serving mainly towards self-employed clients. Mr. Murali Natrajan is the current MD and CEO (since 2009) and has been instrumental in complete overhaul of the bank. The bank plans to double its Balance sheet size in the next 3-3.5 years. As on September 2015, the bank had a network of 160 branches and 373 ATMs.Sudden shift in strategy is leading to sharp earning cut (PBT CAGR of 16% vs 34% earlier) and ROE falling below 10% till FY17. Considering expansion plans and strong growth, management may choose to raise capital over next 12-15 months, which will keep ROE at sub 10% for a prolong period. Management has guided for ROA and ROE to improve to 1-1.2% and 14-16% by FY20-21 and near term ROAs/RoE are expected to be 50-60bp and sub 10%. While strategy of aggressive expansion will have long term benefit, prolonged pressure on ROEs (less than cost of equity) is leading us to downgrade rating to SELL. Our new target multiple is 1.4x FY17 BV – INR90 (33% downside). We may tweak earnings post concall tomorrow.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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