DCB Bank - Promoter Announces Capital Infusion Amid MD, CEO Succession: ICICI Securities

ICICI Securities Report

DCB Bank Ltd. 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-I of less than 30 basis points.

Importantly, the proposed investment would result in ~2% rise in promoter stake, catapulting it to beyond 15%, which could necessitate specific approval from the Reserve Bank of India, in our view.

While the quantum for capital raise is rather modest, promoter intent to increase its stake carries strong positive signalling impact. DCB Bank would see a change of guard in April 2024 wherein the incumbent Managing Director and Chief Executive Officer, 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 Rs 140.

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