Developmement Credit Bank Ltd

BSE Code: 532772

CMP: Rs.43.90

T-Rs.49-52

Time Frame--Rs.90 days

SL--Rs.41.70.

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Development Credit Bank Ltd (DCB Bank: http://www.dcbbank.com) is a modern emerging new generation private sector bank. Present since 1930s, DCB is the only co-operative bank in India to have been converted into a private sector commercial bank in 1995. Distribution network of 82 branches across 28 cities and 140 ATMs (as on September 30, 2011), It has the following: 

(i) Comprehensive product range & scalable infrastructure: (a) Business model focused on achieving a balance between Retail Mortgages, Micro SME, SME, Agri / Microfinance and mid-Corporate, (b) Comprehensive range of banking products across all businesses, (c) Modern systems and infrastructure to support growth- Finacle, FinnOne, CMS, Internet and Mobile banking.

(ii) Traditional loyal customer base: (a) Traditional sticky customer base helped by presence of branch network in select areas of Maharashtra, Gujarat and AP,  (b) Provides DCB Bank access to low cost deposits.

(iii) Continued focus on building low cost franchise: (a) Continued focus on building a low cost deposit franchise with strong capital position, (b) CASA of 33.16% and CRAR of 13.10% under Basel II (as on September 30, 2011).

(iv) Steady improvement in credit ratings: (a) Rating agencies have re-affirmed the rating guidelines for DCB Bank (as on September 30, 2011), (b) Crisil rating (Long term): BBB + / Stable, Crisil rating (Short term): A1 and Fitch rating: BBB / Stable

(v) Robust promoter background: (a) DCB’s promoter, Aga Khan Fund for Economic Development (AKFED) http://www.akdn.org/akfed is present in 16 countries employing over 30,000 people, (b) Promoter group holds 23.07% stake in DCB ( as on September 30, 2011).

(vi) Pedigreed board and experienced management team: (a) Nasser Munjee, Chairman: Ex- Executive Director – HDFC, instrumental in setting up IDFC & sits on the boards of many large Indian companies, (b) Murali M. Natrajan, MD & CEO: worked in Standard Chartered Bank (Global Head – SME Banking), Citibank, American Express; strong Retail Banking & SME experience in India & abroad.
Some Historical Events:
1981-Amalgamation of Masalawala Cooperative Bank and Ismailia Cooperative Bank into Development Cooperative Bank Ltd.
1984--Multi-State Cooperative Bank
1995--Conversion to Development Credit Bank Ltd. Secured Foreign Exchange License & became an Authorized Dealer
1988--Acquired “Scheduled” status from Reserve Bank of India
2004--Classified as a “New Generation Private Sector Bank” by the RBI
2006--It came up with IPO.
2005--Private Equity Investment by AKFED (Principal Promoter) of INR1.38 bn in March 2005.
2006--Private Equity Investment of INR 519.9 mn by HDFC and Khattar Holdings and others in February 2006.
2006--Raised INR 1.86 bn through IPO, issue oversubscribed 35 times.
2007--Preferential Allotment of INR 2.8 bn in Aug 2007 to Al Bateen, TATA Capital, DCB Investments (SVG Capital) and others.
2009--Raised INR 810 mn through QIP in November 2009 subscribed by life insurance companies, mutual funds and FIIs.

Key non-promoter shareholders:

• Al Bateen Investment Co. LLC: 3.69%,
• Tata Capital Ltd.: 3.29%,
• The India Fund, INC: 2.91%,
• DCB Investments Ltd. (SVG Capital): 2.65%,
• HDFC Ltd.: 2.02%,
• Satpal Khattar: 1.62%,
• Rising India Focus Fund Limited: 1.34%,
• The Royal Bank of Scotland PLC as: 1.33% Depository of First State Indian Subcontinent Fund a Subfund of First State Investment,
• Sundaram BNP Paribas Mutual Fund: 1.24%,
• Girdharilal Lakhi: 1.23%,
• Macquarie Bank Ltd.: 1.12%.

AKFED is an international development enterprise. It is dedicated to promoting entrepreneurship and building economically sound companies. AKFED operates as a network of affiliates with more than 90 separate project companies employing over 30,000 people. The Fund is active in 16 countries in the developing world.
Business Strategy:

• Grow Retail Mortgages, micro SME, SME, mid - Corporate and Agri & Inclusive Banking with a “customer centric approach”. Concentrate on secured lending & diversified portfolio.
• Retail – branch centric: (i) Low cost deposits (CASA / Term), (ii) Secured lending (Home loans, Loan against property, Loan Against Term Deposit), (iii) Micro SME, (iv) Traditional customer base, (vi) Third party fee income, Treasury – Liquidity management, opportunity for gains within acceptable risks.
• Relentless focus on Costs / Income Ratio and Service,
• Stringent mechanism for managing Credit and Operational risks,
• Continuously improve people quality and delivery.

Financials: The total income for the Q2FY12, came out to be Rs. 201.69 Cr as against Rs.154.78 Cr in the same period previous year. The net profit of the company for Q2FYT12 came out to be Rs.13.33 Cr as against Rs.4.82 Cr in the same period previous year. The EPS of the company for Q2FY12 jumped almost 3 times as compared to Q2FY11.
Conclusion:The accompanying Candle Stick Chart Pattern, though shows more like the formation of "Doji" pattern but using The Elliott Wave Principle (It measures investor psychology, which is the real engine behind the stock markets--or what the markets are likely to do next and sometimes most importantly, what they will not do next.....The Elliott Wave Principle does not provide certainty about any one market outcome. Instead, it gives you an objective means of determining the probability of a future direction for the market. At any time, two or more valid wave interpretations usually exist. So, it’s important for any investor or trader to carefully assess the probability of each interpretation..), I feel that a beginning of a new up-trend is about to take place. The investors are strongly recommended to buy this scrip at the CMP of Rs.43.90, in view of the recent positive outlook of the bank given by the management. In the long term, the scrip is expected to make new 52-week high and cross Rs.100.