Broker’s call: IndusInd Bank (Buy)

Posted on by

Target: ₹1,800

CMP: ₹944.70

IndusInd Bank is a new-generation private-sector bank. The bank has a pan-India presence, with around 2,631 branches as of Sep’23. The bank delivered a healthy performance in Q2-FY24 with PAT growing by 3 per cent q-o-q and 22 per cent y-o-y.

NII growth was mainly led by strong loan growth (up 21 per cent y-o-y and up 5 per cent q-o-q), while the margin remained steady at 4.3 per cent level on q-o-q basis.

With its strategy focused on containing the rise in cost of funds (COF), the bank aims to sustain its NIMs at the current range of 4.2-4.3 per cent in the coming quarters. Going forward, coupled with robust expansion in its loan portfolio, we expect improvement in profitability.

Asset quality during the quarter has remained sequentially steady with GNPA coming at 1.93 per cent (vs. 1.94 per cent in Q1-FY24) and NNPA at 0.57 per cent (vs. 0.58 per cent in Q1-FY24). Notably, PCR remained steady at 71 per cent level. The restructured book stood at 54 bps from 66 bps in 1QFY24.

Going forward, the bank is expected to grow at the rate of 18-23 per cent. The bank is witnessing strong demand in the CV financing book as well as on the MFI portfolio. The bank is experiencing immense opportunity in the MSME space.

Key Risk Factors: Margin compression; Moderate growth.