Dhanlaxmi Bank surges after takeover plans

Dhanlaxmi Bank may become the target for other private lenders who are still building their low-cost deposit base and looking for sticky retail customers. The share price of the bank increased by 11.85 per cent on bourses in early trades; and is trading at Rs 21.9 on an intra day basis.

Dhanlaxmi Bank has received notice from the Central Bank due to deteriorating capital position. Therefore, it has to soon raise capital, which may be difficult to extract from secondary market, forcing it to look at strategic investors.
The private sector banks such as Yes Bank, HDFC Bank, Axis Bank and RBL Bank are not interested in the stake buyout of Dhanlaxmi Bank.

According to bank’s management, Dhanlaxmi Bank is in talks to raise capital from several investors. The existing investors of the bank may increase their stake in the bank. The bank also clarified in the media that there will not be any takeover right now.

On the financial front, Dhanlaxmi Bank’s interest earned has increased by 3.3 per cent to Rs 202 core in Q4FY16 as compared to previous quarter. The bank’s net loss has widened to Rs 131.6 in Q4FY16 from Rs 55.59 crore in Q3FY16. Its capital adequacy ratio is less than 9 per cent, which is below the mandatory level set by the Reserve Bank of India (RBI). Dhanlaxmi Bank’s gross non-performing assets and net non-performing assets stand at 6.36 per cent and 2.78 per cent in Q4FY16, respectively.

Dhanlaxmi Bank offers deposit products; loans; foreign exchange services comprising foreign currency cash. The bank’s segments include treasury operations, corporate/wholesale banking, retail banking and other banking business operations. It also provides funded and non-funded products, including working capital finance, term loan finance, trade services, foreign exchange, cash management, distribution products and syndication services. Dhanlaxmi Bank has approximately 270 branches and approximately 400 automated teller machines (ATMs).