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Target: ₹140
CMP: ₹119.65
DCB Bank has informed exchanges that AKFED, the promoter of the bank, has expressed its interest to invest up to $10 million by subscribing to additional equity shares. The purpose of the infusion is to further strengthen the bank’s capital position and support its growth plans.
We calculate that the proposed investment would translate to additional tier-1 of <30bps. Importantly, the proposed investment would result in about 2 per cent rise in promoter stake, catapulting it to beyond 15 per cent, which could necessitate specific approval from the RBI, in our view.
While the quantum for capital raise is rather modest, promoter intent to increase its stake carries strong positive signalling impact. The bank would see a change of guard in Apr’24 wherein the incumbent MD&CEO, having served the bank for 15 years (maximum permissible tenure), would step down.
We believe the promoter’s announcement to further infuse capital clearly shows continued commitment amidst management succession. We reiterate Buy with unchanged target price of ₹140.
Key risks are issues in management succession/transition; and higher-than-expected opex.
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