Recently, I came across DCB Bank. The reason it came to my notice is because company announced that it will be allotting 60.58 lakh shares to Promoters (Aga Khan Fund) at Rs 137/- per share.
I started looking deeper into the bank and realized it’s one of the lowest valued listed Private Sector Bank with a PE of around 8.7 and Price to book value of 1.
The reported numbers and valuations looked interesting and below we have shared the summary of Q1 FY 26 concall of the bank to understand the prospects better.
Here’s the list of new recommendations released by us in last few weeks:
- For Insider Bets members – On 26th Nov’25, we released our 6th stock report under “Insider Bets“ subscription. It’s a fast growing company with 150% growth in sales and 300% growth in PAT in last 4-5 years. Valuations are attractive at around 10 times pre-tax earnings and Promoters are buying the stock from open market. You can access it by signing up HERE
- For Alpha + members – On 11th Nov’25, we released a new Special Situation opportunity for Alpha + members. The latest special situation recommendation is a buy-back based opportunity. The holding period for this one should be around 1-2 months. The upside potential is around 17% from our recommended levels (assuming full acceptance). You can access it by signing up HERE
- For Alpha/Alpha + members – On 9th Oct’25, we released a new long term investment recommendation for Alpha and Alpha + members. It deals in Protective Gear with strong sector tailwinds. Co. has spent ~200 crore on capacity expansion in last 3 years and management is targeting 2x sales in 3 years. You can access it by signing up HERE
DCB Bank – Q1 FY 26 concall notes
Management highlighted consistent, sustainable growth with deposits +20% YoY (INR 62,039 Cr) and advances +21% YoY (INR 51,215 Cr).
PAT at INR 157 Cr (+20% YoY), driven by highest-ever operating profit (INR 327 Cr, +59% YoY) and total fees (INR 236 Cr, +65% YoY; core fees INR 134 Cr, +17.5% YoY).
NIM compressed 9 bps QoQ to 3.20% despite 100 bps repo cuts, aided by deposit rate adjustments and short-tenor/fixed-rate focus. ROA at 0.81% (target 1%+ near-term); cost/income at 59.97% (target <60%)
Performance Highlights:
- Income: NII INR 581 Cr (+17% YoY); total income INR 817 Cr (+28% YoY)
- Asset Quality: GNPA 2.98% (stable QoQ); NNPA 1.22% (+10 bps QoQ); PCR 74.04% (-44 bps QoQ due to INR 175 Cr technical write-offs). Slippages 4.59% (up from 3.09% QoQ; 3.1% ex-gold); recoveries/upgrades 70% of slippages. Accelerated provisions (INR 115 Cr) covered 100% of legacy MFI/unsecured DA NPAs (as of Mar 31, 2025)
- Costs & Efficiency: OPEX INR 490 Cr (+13% YoY); employee costs up on hikes/bonuses despite headcount cut to 10,886 (-1.5% QoQ). Cost-to-assets 2.52% (target <2.50%)
- Balance Sheet: CASA 23.32% (-120 bps QoQ); top-20 deposits 6.81%. CAR 16.66% (Tier 1 14.20%)
- Segment Growth (YoY): Mortgages +17%, Co-lending +162%, AIB +12%, Construction Finance +34%, Gold +34%; SME/MSME flat
Management Commentary (Praveen Kutty):
- Positives: 4th straight quarter of 19-20% YoY growth; operating leverage at 15% (revenue +28%, costs +13%). Fee growth in line with balance sheet; treasury gains (INR 101 Cr) one-off but core sustainable
- Challenges: Slippages elevated from MFI, unsecured DA (small book, ~INR 2,500 Cr total unsecured), and surprise stress in small-ticket secured DA (Rs 2-10 lakh). Gold slippages high but low net impact (high recoveries via auctions). MFI stress may linger 2-3 quarters industry-wide
- Strategic Shifts: Q1 focus on short-tenor/fixed loans to mitigate rate cuts; ramping longer-tenor mortgages from Q2. Increasing LAP share in mortgages (3-4 quarters of higher sourcing). Testing DA for validation (e.g., school finance success); cap co-lending at 15% of book. Mindset change to holistic self-employed customer solutions (surplus/deficit/risk/trade needs)
Key Q&A Themes:
- Asset Quality/Credit Cost: Slippages from multiple lines (MFI ~Rs 200 Cr delta; secured DA surprise); no major pending flows. Credit cost 59 bps in Q1 (accelerated); FY26 <40 bps (vs. 45-55 bps guidance). Focus: Rein slippages to <2.5%, boost recoveries >80%. Limited recourse on DA but small pools limit impact
- NIM/Margins: Yield -30 bps QoQ; COD -16 bps. Full repo transmission (phased over quarters); SA/TD cuts to yield benefits over 13-15 months (~INR 3,000 Cr/month repricing). Target 3.20-3.25%; no further cuts assumed
- Fees/Growth: Core fees seasonal (Q1 lower than Q4 TPD/processing); target 1.1% of avg. assets FY26. Advances/deposits ~20% FY26 (organic-led; mortgages/SME/AIB drivers). Slow co-lending post-Q1; SME scaling via OD push (to 100K+ mortgage customers) and Rs 3-10 Cr segment
- Costs/ROA: Frontline cuts improved productivity (tech/mobile LOS); OPEX to mirror growth but < advances via leverage. ROA path: NIM +21 bps to 3.20%, fees 1.1%, costs 2.50%, provisions 45 bps → 1%+
- Outlook: 20%+ growth sustainable; NIM stable; credit cost <40 bps; ROA 1%+; ROE ~14%. Priorities: Customer-centric shift, digital/paperless, productivity. Confident in granular, secured model amid rate dynamics; watch MFI/DA stress
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Disclaimer: This is not a recommendation to buy/sell any of the stocks mentioned above. The securities quoted are for illustration only and are not recommendatory.
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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