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India Equity Research Reports, IPO and Stock News
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A I B O C a l l e g a t i o n s l e a d t o s t o c k t a n k i n g 1 0 % . . .
As per news reports, the All-India Bank Officers Confederation (AIBOC)
has submitted a memorandum to the RBI alleging that Dhanlaxmi Bank
has manipulated accounts and provisioning, has a mismatch in assetliability resources, maintains poor capital adequacy ratio and has huge
dependence on call money borrowing. It cautioned against higher NPA
and accused the bank of window dressing its books to inflate profits.
Dhanlaxmi’s management has rejected these allegations regarding them
as baseless. According to Bipin Kabra, CFO, “The union is getting
marginalised every year. Currently, less than 10% workers are in AIBOC.
Our current capital adequacy is at around 10%. We see non-performing
assets dropping every quarter”. Given the seriousness of these
allegations and no response from the RBI on the issue we are cautious
on the bank and would advise investors to avoid the stock. For
investors holding the stock we would recommend exiting the stock on
rallies.
ƒ Long-term asset funding through shorter duration liabilities…
We have analysed the maturity profile of Dhanlaxmi Bank’s assets and
liabilities (FY11 data) to ascertain if there is a mismatch. We infer that
while ~40% of advances and investments lie in the maturity bucket of
three years and above, only 2.5% of deposits and borrowings lie in
the same (refer Exhibit 1). This implies that even though bank’s assets
(especially advances) are heavily tilted towards longer term, it is being
financed through short-term liabilities, which is a cause for concern.
V a l u a t i o n
Even though the stock has corrected by ~10% in a single session, we are
cautious on it. The bank reported a dismal performance last quarter with
profits declining 43.6% YoY to | 3.4 crore. Despite an estimated business
growth of 35% CAGR and PAT growth of 59% CAGR over FY11-13E,
return ratios are expected to remain depressed with RoA at 0.3% and RoE
at 5.3% by FY13E. Moreover, the recent deferment of its capital raising
plan had also led to an overhang on the stock. However, in light of
AIBOC’s allegations we would recommend avoiding the stock until more
clarifications or facts materialise. We would advise investors already
holding the stock to exit on rallies.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A I B O C a l l e g a t i o n s l e a d t o s t o c k t a n k i n g 1 0 % . . .
As per news reports, the All-India Bank Officers Confederation (AIBOC)
has submitted a memorandum to the RBI alleging that Dhanlaxmi Bank
has manipulated accounts and provisioning, has a mismatch in assetliability resources, maintains poor capital adequacy ratio and has huge
dependence on call money borrowing. It cautioned against higher NPA
and accused the bank of window dressing its books to inflate profits.
Dhanlaxmi’s management has rejected these allegations regarding them
as baseless. According to Bipin Kabra, CFO, “The union is getting
marginalised every year. Currently, less than 10% workers are in AIBOC.
Our current capital adequacy is at around 10%. We see non-performing
assets dropping every quarter”. Given the seriousness of these
allegations and no response from the RBI on the issue we are cautious
on the bank and would advise investors to avoid the stock. For
investors holding the stock we would recommend exiting the stock on
rallies.
ƒ Long-term asset funding through shorter duration liabilities…
We have analysed the maturity profile of Dhanlaxmi Bank’s assets and
liabilities (FY11 data) to ascertain if there is a mismatch. We infer that
while ~40% of advances and investments lie in the maturity bucket of
three years and above, only 2.5% of deposits and borrowings lie in
the same (refer Exhibit 1). This implies that even though bank’s assets
(especially advances) are heavily tilted towards longer term, it is being
financed through short-term liabilities, which is a cause for concern.
V a l u a t i o n
Even though the stock has corrected by ~10% in a single session, we are
cautious on it. The bank reported a dismal performance last quarter with
profits declining 43.6% YoY to | 3.4 crore. Despite an estimated business
growth of 35% CAGR and PAT growth of 59% CAGR over FY11-13E,
return ratios are expected to remain depressed with RoA at 0.3% and RoE
at 5.3% by FY13E. Moreover, the recent deferment of its capital raising
plan had also led to an overhang on the stock. However, in light of
AIBOC’s allegations we would recommend avoiding the stock until more
clarifications or facts materialise. We would advise investors already
holding the stock to exit on rallies.
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