Dhanlaxmi Bank- Free from the PCA Stranglehold

India focused Portfolio Advisory - Exp of 40+years, Das Capital Management and Advisors

Arun Thirumalai

India focused Portfolio Advisory - Exp of 40+years

Das Capital Management and Advisors

Das Capital is a research boutique with an aim to continuously map and plan the investment needs of investors focused on India. We have a six member research team with a combined experience of over 40 years as a part of our investment wing. Our team assisted in the setup of Premji Investments, which was one of India’s first family offices focused to managing Mr.Azim Premji personal wealth. We also serve as a research team to two Indian private equity energy funds “Small is Beautiful” and “KSK Emerging India Energy Fund”.

Equity Bottom-Up

In our note on Dhanlaxmi Bank <a href="https://www.smartkarma.com/insights/dhanlaxmi-bank-a-south-indian-bank-on-the-cusp-of-a-turnaround" target="_blank" data-smartkarma-citation="insights:15360">Dhanlaxmi Bank- A South Indian Bank on the Cusp of a Turnaround</a> , we elaborated on the repercussions post the reckless expansion between FY09-11. We detailed the measures taken by the bank that would help in a turnaround. We believe that the bank is genuinely putting efforts that are reflected through a significant improvement in its operating efficiency in the last three years. However the legacy NPAs continues to bite.
We expected that the bank may continue improving its Gross NPA that declined by 200 bps from 7% in FY15 to 4.8% in FY17. But the recent scam in the Gems and Jewellery space (PNB Scam) took a toll on the asset quality in FY18. We attended the Annual General Meeting held on 27th September in Thrissur, Kerala. There has been a management change and we found the management quite straightforward in their responses and very confident to deliver results by the next year in spite of significant challenges ahead of them in terms of asset recoveries as well the recent macro headwinds that may affect its treasury income. The bank is backed by the Travancore Devaswom Board, one of the richest temple trust in Kerala and a key customer, which bodes well for any long-term capital requirements.

In our note on Dhanlaxmi Bank Dhanlaxmi Bank- A South Indian Bank on the Cusp of a Turnaround , we elaborated on the repercussions post the reckless expansion between FY09-11. We detailed the measures taken by the bank that would help in a turnaround. We believe that the bank is genuinely putting efforts that are reflected through a significant improvement in its operating efficiency in the last three years. However the legacy NPAs continues to bite.
We expected that the bank may continue improving its Gross NPA that declined by 200 bps from 7% in FY15 to 4.8% in FY17. But the recent scam in the Gems and Jewellery space (PNB Scam) took a toll on the asset quality in FY18. We attended the Annual General Meeting held on 27th September in Thrissur, Kerala. There has been a management change and we found the management quite straightforward in their responses and very confident to deliver results by the next year in spite of significant challenges ahead of them in terms of asset recoveries as well the recent macro headwinds that may affect its treasury income. The bank is backed by the Travancore Devaswom Board, one of the richest temple trust in Kerala and a key customer, which bodes well for any long-term capital requirements.

Dhanlaxmi Bank- Status Check -Excerpts from the AGM- There Is Light at the End of the Tunnel