DCB Bank plans to raise capital in Q2 of next fiscal

Stock slips 10% on margin pressures

DCB Bank might visit the market in the second quarter of the next financial year to raise capital.

Murali Natrajan, managing director and chief executive officer, said the present capital adequacy ratio was strong (15.55 per cent in June) and the timing for a capital offering would depend on market conditions.

Backed by the Aga Khan Fund for Economic Development, it had raised ~3.8 billion through Qualified Institutional Placement (QIP) in 2017.

Earlier in 2014, another ~2.5 billion through QIP; in 2012, ~2.33 billion, of which ~1.39 billion was a preferential allotment and ~0.94 billion via QIP.

The pace of growth has been fast, doubling its loan book in about 3.5 years. In the 12 months ended June, the BSE-listed bank’s credit— essentially to individuals and small and medium enterprises—rose Timeline for capital raising 2005 2006 2007 2009 2012 2014 2017 Private equity IPO plus private equity Preferential allotment QIP QIP & preferential offer QIP QIP 31 per cent to ~212.4 billion from a year before. The loan book stood at ~104.6 billion in March 2015.

Shares of the Mumbaibased lender closed sharply lower on Monday by about 9.9 per cent, at ~161.6 on the BSE. This was after its had declared its results for the June quarter on Saturday.

While it saw a marginal rise in net profit over the same quarter last fiscal, its net interest margin (NIM) dipped, both year on year and sequentially.

Net profit rose to ~700 million in the quarter, from ~650 1.40 2.38 2.80 2.33 million a year before. Net interest income was ~2.73 billion, against ~2.33 billion for the same period of 2017.

NIM declined to 3.9 per cent, as against 4.23 per cent a year before and 4.09 per cent for the earlier quarter.

Given the competition, the range of 3.75-3.85 per cent was a decent level to operate in and NIM was not expected to fall much further. New branches (323 in June, from 160 in October 2015) are expected to begin to contribute in the coming quarters, providing stability to the margins.