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Dena Bank public issue: A precursor - Views on News from Equitymaster
 
 
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  • Jan 14, 2005

    Dena Bank public issue: A precursor

    The second public issue of Dena Bank, one of the oldest public sector banks in the country, will open on January 24, 2005. Through this public issue, the company has put on offer 80 m equity shares of the face value of Re 10 each. The issue is on a fixed price basis at a premium of Rs 17 over and above the face value. At a price of Rs 27 per share, the issue aggregates to Rs 2.2 bn. The issue will bring down the government holding in the bank from the present 71% to 51%.

    Financial snapshot...
    (Rs m) FY01 FY02 FY03 FY04 1HFY05
    Interest earned 17,164 17,084 17,723 17,355 8,786
    Interest expended 12,675 12,656 12,042 11,432 5,506
    Net Interest Income 4,489 4,428 5,681 5,923 3,280
    Other Income 1,991 3,508 4,241 6,173 1,862
    Other expenses 5,769 4,581 5,115 4,978 2,579
    Operating Profits (1,280) (153) 566 945 701
    Provisions 3,342 3,240 3,796 4,801 1,796
    Net Profits (2,631) 115 1,011 2,317 767
    NPM(%) -15.3% 0.7% 5.7% 13.4% 8.7%
    No of shares (m) 207 207 207 207 207
    EPS (Rs) (12.71) 0.56 4.88 11.19 3.71

    About the company
    With over 66 years of presence and being one of the first banks to be nationalized, Dena Bank, originally incorporated as "Devkaran Nanjee Banking Company Ltd", has an extensive network in the western region of the country. The bank has the distinction of establishing the first fully computerized branch at Nepeansea Road, in Mumbai, in the early 1990s.

    Despite having augmented its branch network from 235 (at the time of nationalization) to 1,130 branches today, the bank has lagged behind its peers in terms of its retail focus. Retail loans that account for a mere 8% of the bank’s total advances also seem to be mainly concentrated in the rural areas. The bank has a lot of catching up to do to match its peers in this respect.

    The main concerns for the bank remain its capital adequacy ratio of 10.3% (which is lower than peers) and NPAs to advances ratio of 7.9% (highest in the industry), which the bank hopes to correct with the success of this issue. The credit growth of the bank that was on an escalation track for the past couple of years, has once again dwindled due to the lack of sufficient capital to support it.

    Our IPO analysis

    While this write-up was just a brief regarding the overall business of Dena Bank, we shall put up a detailed report on the issue soon, which will elaborate on the business model of the company as well as its comparative standing with its peers and its growth prospects going forward. The report will also cite the reasons to apply/not apply for the public issue.

    At the current price of Rs 38, the stock is trading at a price to book value ratio of 1.8 based on 1HFY05 book value.This puts it at the lower end of the valuation spectrum. The weak fundamentals of the bank seem to have been already factored in to the prices.

     

     

    Equitymaster requests your view! Post a comment on "Dena Bank public issue: A precursor". Click here!

    1 Responses to "Dena Bank public issue: A precursor"

    rajendraprasad

    Mar 10, 2010

    my father was employee of dena bank and he holds 400 nos of share and now he expired om 3rd feb 2009 i want to know the value of the share on 3rd feb 2009

    Like (1)
      
    Equitymaster requests your view! Post a comment on "Dena Bank public issue: A precursor". Click here!
     

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