Dhanlakshmi bank


Dhanlakshmi Bank is a very old bank set up in Kerala in 1927. Mr Raja Mohan Rao had a majority stake of 37% in 2007 in this bank but due to this there was no professional management to steer the bank in a proper direction. In 2007, a German bank and some foreign funds bought majority of Mr Raoâs stake and they installed the former SEBI chief Mr G N Bajpai to run the ship.

Since the last three years, Dhanlakshmi Bank has grown its deposit base by 4 times and loan base by 3 times. This has been done under the leadership of Mr Amitabh Chaturvedi who took over the helm of affairs since Oct 2008 and has transformed the outlook and working of the bank from being a traditional South based bank to a more modern professional outfit. In these years the net profits have grown only 3% CAGR.

CMP 108 MARKET CAP 915 crores

Fy 11 book value close to Rs 100 per share.

Outstanding shares are 8.51 crore shares of Rs 10 each.








Int earned
















Dec 09

Mar 10

Jun 10

Sep 10

Dec 10

Mar 10

Int earned




























Coming to some data regarding the bank, as on March 11, the bank had a customer base of 16 lac and the net NPA to advances was down to 0.3%. At the end of FY 11 the gold loans formed around 34% of total loans and mortgages formed another 22% of total loan book.

For FY 11 the ROE was 4.8% and ROA was low at 0.4% . These are expected to improve significantly in line with increasing profitability of the bank due to stabilisation of operations , higher productivity per employee and modernisation.

Some advantages that Dhanlakshmi has over peers are

1. There is lower level of unionization of employees at Dhanlakshmi Bank as compared to Federal Bank or South Indian bank.

2. Dhanlakshmi Bank is on the cusp of a strong turnaround in fortunes and its key operating parameters.

3. Lower base effect reduces the systemic risks for Dhanlakshmi Bank.

Some key opportunities for Dhanlakshmi Bank are

1. its loyal customer base, new and aggressive top management

2. good growth opportunities in newer geographies,

3. technology upgradation leading to acquisition of new customers which were not targeted earlier

4. Rebranding and marketing are likely to improve awareness about the bank.

5. Cost efficiency measures implemented by the bank can lead to higher profitability for the bank.

6. Distribution agreements forged with various fund houses like birla sunlife, SBI MF, Principal MF etc is likely to increase fee based income.


1. Inability to raise capital will necessitate the bank to lower its growth targets. The postponement of QIP recently has led to a weakness in the stock price currently.

2. Slowdown in economy may raise headwinds for the bank.

3. Till date the asset quality of Dhanlakshmi Bank has been good but any deterioration in asset quality might be a risk.

4. Inability to contain and reduce operating costs would be a risk.

Investment in Dhanlakshmi Bank is a sort of contra investment bet. If the management achieves its targeted growth and higher operational efficiency due to the measures taken, then this investment could offer good returns.

Conventional wisdom is to look at the poor return ratios of the bank and negative sentiments arising out of postponement of the qip issue and reject the investment hypothesis. But a contra look would entail looking at 2-3 years down the line and consider the investment. I feel some amount of contra bet is advisable here.

Views invited.

1 Like

Looking at the interest rate cycle we are nearly at the peak now, Banks look good for investment, I have attached a chart of India Interest rate cycle from 2001.

I think one needs to view both sides views’ carefully bcos the employee union also could be acting with spite here.

Taking a bet here could be a difficult thing at current juncture.

Clarification from CFO.:http://www.moneycontrol.com/news/business/dhanlaxmi-bank-hits-52-week-lowunion-allegation_597074.html#toptag

Hitesh ji, At Rs 65 the stock looks very attractive. I spoke to few friends back home and they feel the allegations may be baseless. This is one bank in which the union has no say (only a small fraction of the employees are members of the said union which made the allegations). This might be the unions way of trying to gain more control.

With Mr Chaturvedi taking over the steering there was speculation that Reliance is behind the move and will eventually take over the bank. The rumours on this are still active and the bank might be cleaning up the books (last quarters mark-to-market loss) to get ready for this. The name was changed from the south indian name of “Dhanalakshmi” to “Dhanlaxmi” and headquarters has been shifted to Mumbai (or will be shifted soon).

But wouldnt reliance want the prices to be as low as possible before they move in?

Your views



The current scenario looks murky with allegations and counter allegations from both sides. I would like to allow the dust to settle before diving in here. Especially since the market correction has thrown in more alluring bargains in the banking space as well as the general markets.

The cfo of the company who I heard on cnbc was being quite categorical in denying the allegations. I think more needs to be done by the management to take care of the allegations.

P.G. Jayakumar, MD & CEO of the bank addressed the call:Highlights by Capital Mkt:

  • Branch network of the bank stood at 280 branches at end December 2013, while bank has the employee strength of 2561 employee at end December 2013.

  • Bank witnessed sharp deterioration in asset quality in quarter ended December 2013. GNPA ratio surged to 7.05%, while NNPA ratio jumped to 4.64% at end December 2013 from 5.31% and 3.69% at end September 2013.

  • Fresh slippages of advances surged to Rs 151 crore in Q3FY2014 from Rs 30 crore in Q2 and Rs 75 crore in Q1. Meanwhile, the recoveries and upgradations stood at Rs 33 crore in Q3 against Rs 44 crore in Q2 and Rs 16 crore.

  • However, of the fresh slippages of Rs 151 crore in Q3FY2014, about Rs 70 crore from three accounts slipped to NPA category due to small arrears. Bank expects to recover dues and accounts would be upgraded in Q4FY2014.

  • Overall, bank expects to recover about 50% of the GNPAs or Rs 200-250 during Q4FY2014 against Rs 100 crore in Q4FY2013. Bank has already recorded recoveries and upgradations of Rs 95 crore in 9MFY2014, while overall figure would be Rs 350 crore for FY2014.

  • With the strong recoveries in Q4FY2014, bank expects to cut the GNPA ratio to 4.0-4.5% and NNPA ratio to 2.5-3.0% by end March 2014.

  • Bank has identified about Rs 130-150 crore bad loans for sales to Asset Reconstruction Companies (ARCs).

  • Bank expects sectors such as real estate, infrastructure, education, engineering etc to contribute to the recoveries and upgradations in Q4FY2014.

  • As per the bank, the strong recovery performance would improve other income by Rs 70-80 crore in Q4FY2014. Overall, other (non-interest) income is expected at Rs 120 crore in FY2014, rising from Rs 55 crore in 9MFY2014.

  • Bank has appointed consultant for strategic sale of investment in Destimoney, which is expected to garner income of Rs 9-10 crore, while bank is also expecting income of Rs 10 crore from insurance segment in Q4FY2004.

  • Bank expects the strong other income to take care of provisions for investment depreciation and provisions as suggested in annual financial inspection by RBI for Q4FY2014.

  • During FY2013, the overall fresh slippages stood at Rs 528 crore, of which bank has recovered and upgraded about Rs 300 crore.

  • Bank does not expect any fresh slippages of advances in Q4FY2014. Fresh slippages of advances has eased from Rs 528 crore in FY2013 to Rs 256 crore in 9MFY2014, while bank expects the fresh slippages to further decline in FY2015.

  • Bank has restructured advances worth Rs 85 crore, mainly contributed by metal sector account. Outstanding restructured advances of the bank stood at Rs 183 core at end December 2013.

  • On growth front, bank earlier wished to grow 20%, but had to moderate its growth on account of weak economic environment. Bank expects to touch the growth of 10% in FY2014, while expects growth to accelerate to 20% in FY2014.

  • As per the bank capital infusion in January 2014, would push up the Capital Adequacy Ratio to above 14%, which would take care of strong 20% advances growth in FY2015. Bank expects further capital infusion in FY2016.

  • Retail segment accounted for about 60% of the advance book, while SME and corporate segment accounts for 20% each at end December 2013. Bank proposes to moderate the retail advances growth, while would focus on SME segment.

  • Gold loans, part of retail book nearly doubled to Rs 1400 crore, accounting for nearly 20% of the overall advances book. The LTV ratio on gold loans stood at 75-80%. Gold loans ticket size stood at Rs 0.5-1 lakh.

P.G. Jayakumar, MD & CEO of the bank add the call:Highlights by Capital Mkt;

  • Bank is not keen on expanding the liability base due to lack of credit growth opportunity.Bank is mainly focusing on retail and SME book on the advances growth front. During H1FY2015, bank sanctioned loans worth Rs 2200 crore, while disbursed Rs 1700 crore of advances.Nevertheless, the advances book rose by mere Rs 60 crore in H1FY2015 owing to large repayments.
  • Bank expects the advances book to be steady for next 3-4 months, while proposes to improve advance book to Rs 9000 crore by end March 2015. Bank has created teams to mobilize retail assets.Bank has witnessed improvement in NIM to 2.3% in Q2FY2015. Bank proposes to further improve NIM by enhanced lending to retail and SME sectors.
  • Fresh slippages of advances stood at Rs 56 crore, while bank has made recoveries and upgradations of advances worth Rs 46 crore in Q2FY2015.The proposed sales of Rs 250 crore bad loans to Asset Reconstruction Companies (ARCs) planned for Q2FY2015 could not take place.
  • Going forward, bank do not expect any major slippages, as no major account likely to slip is pending as well as SMA accounts position of the bank also stands comfortable.As per the bank, the current capital base is sufficient to expand loan book by Rs 2000 crore.Fresh restructuring of advances stood at Rs 80 crore in Q2FY2015. The restructured advance book of the bank stood at Rs 234 crore at end September 2014.
  • Bank expects no major restructuring of advances, going forward.During last three years, bank has made loan loss provisions worth Rs 370 crore.Bank has shade Rs 860 crore of bulk and interbank deposits in H1FY2015, while proposes further reduce these deposits by another Rs 700 crore by end March 2015. Bank expects to reach the deposits base of Rs 12500-13000 crore by end March 2015.
  • CASA ratio of the bank stood at 23.5% at end September 2014.Bank has excess SLR investment of Rs 1450 crore, while its SLR ratio stood at 40%.Bank made provisions for mark-to-market investment depreciation of Rs 98 crore in FY2014, while bank expects to reverse these entire provisions in FY2015 with favourable movement in interest rates.Bank expects to achieve retune on assets (ROA) of 0.3% in FY2015, while proposes to improve ROA to 1% over next two-years.

Re-opening the discussion… as bank bottom line indicating turn-around.
Anyone from Banking space could please confirm sustainability of business/bank…


Whenever I think of fixed deposits, the first bank that comes to my mind is Dhanlakshmi Bank. I like their service because of easy banking process.

Now this bank is changing its position slowley and wisely current enviorment is also very interesting 2.5% net npa is not bad now.
If LVB gets meger approval than at 400cr any HFC can buy this bank.
Only if LVB IBHF deal goes thru it will be multibagger

some one tracking this bank pls share views

DISC.:- Tracking position

If govt gives support to banks like YES BANK than Dhanlakhmi will defenately not going to close …
Can anyone throw some light on future of such banks ?

How do we read the recent resignation by an Independent Director and serious allegations made by him on the management / BOD with respect to several aspects including ethics, corporate governance etc?

Depsite such serious allegations, market has responded positively and the stock price is making new highs.


@mak2569 pleasse do read this 6 pager regination letter.

1 Like