DCB Bank Share Price Target at Rs 228: Ventura Securities
Ventura Securities Limited has issued a BUY recommendation for DCB Bank Limited, setting a compelling target price of Rs 228 over the next 24 months, implying a robust 33.8% upside from the current market price of Rs 170. This assessment underscores the bank's unyielding resilience amid economic vicissitudes, propelled by a 95% secured loan portfolio that fortifies asset quality and a strategic pivot toward diversified, high-yield lending. With net advances poised to double to Rs 85,736 crore by FY28 at an 18.9% CAGR, and deposits surging to Rs 1,00,825 crore, DCB exemplifies prudent expansion. NIMs are projected to inch up 11 basis points to 3.39%, ROE to 13.6%, and credit costs below 45 bps, positioning it as a paragon of stability for discerning investors navigating India's banking sector.
DCB Bank's Stalwart Growth Trajectory
Ambitious Loan Book Doubling Imperative. DCB Bank aspires to bifurcate its loan book within 3 to 3.5 years, targeting Rs 85,736 crore by FY28 via an 18.9% CAGR from FY22-FY25's 20.6% momentum. This escalation emanates from a recalibrated product mélange, wherein business loans (BL) and loans against property (LAP) constitute 60% of fresh disbursements, supplanting home loans at 40%, thereby engendering superior yields, expeditious repricing, and cross-selling synergies in CASA, overdrafts, and trade finance. Retail banking, commanding 67.5% of advances, will burgeon at 18.3% CAGR to Rs 56,348 crore; Agri Inclusive at 18.7% to Rs 19,729 crore; SME/MSME at 27% to Rs 5,120 crore; and Corporate at 28.5% to Rs 6,179 crore.
Geographical Fortification and Secured Fortress. A pan-India branch footprint—19% North, 19% South, 12% East, 31% West—dilutes regional vicissitudes, contrasting southern-centric peers like City Union Bank (88% South). With 94.7% of the portfolio secured, predominantly mortgages, loss-given-default (LGD) remains negligible, slippage ambitions target sub-2.5% (from 3%), and credit costs stay below 45 bps. GNPA edges to 2.92% and NNPA to 1.09% by FY28, buttressed by 100% provisioning on microfinance and unsecured direct assignments.
Deposit Mobilization Mastery
Granular Liability Base Acceleration. Deposits have accreted at 20.6% CAGR to Rs 64,776 crore by Q2FY26, eclipsing sector's 12%, with projections to Rs 1,00,825 crore by FY28 (18.9% CAGR). CASA lingers at 23.5%, term deposits at 76.5%; repricing tailwinds from 14-15 month tenor deposits will ameliorate funding costs, narrowing the premium over large peers from 150 bps to 50-60 bps. Branch proliferation to 525 by FY28 and workforce augmentation in Tier 2-6 enclaves will amplify per-branch advances to Rs 163 crore from Rs 110 crore.
Strategic Cost Arbitrage. This deposit accretion sustains a credit-deposit ratio (CDR) around 75-82%, fueling NIM resilience despite rate incisions. Investments, 80% sovereign securities yielding 7.2%, swell 24.3% CAGR to Rs 38,697 crore, diversifying revenue streams.
Financial Pro-forma and Margin Resilience
| FY | Interest Earned (Rs Cr) | NII (Rs Cr) | PPOP (Rs Cr) | Net Profit (Rs Cr) | NIM (%) | EPS (Rs) | ROAA (%) | ROAE (%) |
|---|---|---|---|---|---|---|---|---|
| FY24 | 5,362 | 1,928 | 865 | 536 | 3.7 | 17.1 | 0.93 | 11.1 |
| FY25 | 6,471 | 2,107 | 1,037 | 615 | 3.3 | 19.6 | 0.88 | 11.4 |
| FY26E | 7,923 | 2,588 | 1,284 | 693 | 3.3 | 22.0 | 0.90 | 12.2 |
| FY27E | 9,425 | 3,152 | 1,580 | 864 | 3.4 | 27.4 | 0.94 | 13.5 |
| FY28E | 11,155 | 3,724 | 1,814 | 980 | 3.4 | 31.1 | 0.90 | 13.6 |
Yield and Efficiency Escalation. Interest income burgeons 19.9% CAGR to Rs 11,155 crore; NII at 20.9% to Rs 3,724 crore; non-interest income 16% to Rs 1,171 crore. Yield on advances hits 10.2%, cost of funds 6.9%, NIM 3.4%; PPOP margin ascends 35 bps to 14.7%, cost-to-income dips 20 bps to 25%. Opex/assets stabilizes at 2.6%; headcount trims 9.4% YoY in Q2FY26 amid 19.1% advance growth.
Valuation Matrix and Investor Targets
Peer-Superior Metrics. Trading at 0.9x P/ABV, DCB outpaces HDFC (15%) and Kotak (18%) in advances/deposit growth, aligning with IDFC First and Equitas. Ventura's 1.0x FY28E P/ABV on Rs 227.5 adjusted BVPS yields Rs 228 target; Bull case 1.2x (Rs 270, 58.9% upside); Bear 0.8x (Rs 188, 10.7% upside). CRAR 16.8%, Tier-1 14.3% obviate capital augmentation.
| Metric | DCB FY28E | Peers Avg |
|---|---|---|
| P/ABV (x) | 1.0 | 0.8-1.2 |
| ROAE (%) | 13.6 | 10-15 |
| GNPA (%) | 2.92 | 2-3 |
| NNPA (%) | 1.09 | 1-2 |
| Credit Cost (bps) | <45 | 50-70 |
Investment Levels for Precision Entry. Support Pivot: Rs 160-165 (52-week base, PBV lower band 0.8x); Accumulation Zone: Rs 165-175 (CMP vicinity, 20% buffer); Breakout Threshold: Rs 190 (52-week high, momentum ignition); Target Corridor: Rs 220-235 (core objective, 30-38% yield); Stretch Ambition: Rs 260-275 (Bull scenario). Monitor NIM trajectory, slippage compression below 2.5%, and deposit premium sustenance for re-rating catalysts. Prudent investors should allocate amid volatility, leveraging DCB's cyclical fortitude.
Leadership Vanguard and Strategic Imperatives
Seasoned C-Suite Proficiency. Praveen Kutty (MD/CEO, 34 years) helms retail/agri/SME; Abhijit Bose (CCO, 26 years) stewards credit; Ravi Kumar (CFO) excels in transformations. FY25 annual report spotlights BL/HL mix, "45 Under 45" leadership pipeline, AI/cloud infusions, and unblemished auditor opinion. Contingent liabilities at Rs 12.4 lakh crore, negligible related-party exposures.
Key Monitorables. Vigilance on NIM accretion, asset quality invariance, and growth perpetuity will dictate re-rating. Ventura's BUY encapsulates DCB's metamorphosis from niche lender to comprehensive financier.
