Shares of IndusInd Bank hit an over three-year high of Rs 1,294.65, up 2 per cent on the BSE in Monday’s intra-day trade amid expectations of healthy outlook going forward. The stock of private sector lender trading at its highest level since February 2020. In past one month, IndusInd Bank has outperformed the market by surging 12 per cent, as compared to 2.7 per cent rise in the S&P BSE Sensex.
A sharp up move in market price of IndusInd Bank, help the lender to regain the Rs 1 trillion market capitalisation (market cap) today. At 11:23 AM; the stock was up 1.8 per cent at Rs 1,291.50, with a market capitalisation of Rs 1.002 trillion, the BSE data showed.
IndusInd Bank is a Hinduja group promoted new-age private sector bank and is the fifth largest private bank in India. Vehicle finance forms around 26 per cent of overall loans.
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IndusInd Bank reported a healthy set of numbers in January-March quarter (Q4FY23) with strong growth in loan book, stable net interest margins (NIMs) and lower provisions. The bank reported a 21.3 per cent year-on-year (YoY) growth in advances, led by higher disbursement and strong growth in the consumer and corporate segments.
While, announcing results on April 24, the management introduced planning cycle - 6 (FY23–26) wherein they have guided for 18-23 per cent YoY credit growth, mainly-driven by retail (55-60 per cent proportion) and pre-provision operating profit (PPOP) margins to be 5.25-5.75 per cent.
According analysts at Prabhudas Lilladher, pace of retail deposit (as per LCR) accretion would be a key driver to loan growth and it factoring a 18 per cent loan CAGR over FY23-25E.
“Adding branches would be necessary for strong retail business growth, and we see cost to income at average 45.6 per cent in FY24/25E (44.3 per cent in FY23). Asset quality has been stable and buffer provisions are 66bps; bank would like to further build these provisions. We expect RoE to enhance from 14.5 per cent to 16.2 per cent over FY23-25E,” the brokerage firm said with a buy rating on stock and have a target price of Rs 1,530 per share.
Analysts at KR Choksey Institutional have a ‘Buy’ rating on IndusInd Bank with a target price of Rs 1,475, as the brokerage firm expects the auto and micro finance institutions (MFI) segment saw a gradual improvement and is expected to be sustainable - in upcoming quarters.
Focus on new business verticals (home loan) to aid business growth and gain market share. Uptick in NIMs led by higher share of retail loans including micro-finance segment and ramping up phygital distribution channels to keep CI ratio elevated for couple of quarters. However, improvement in credit cost will boost earnings growth and return ratio, according to analysts at ICICI Securities.
Higher than industry credit growth, selective lending with emphasis on high yield segments and moderation in credit cost to aid improvement in RoA to ~1.9 per cent over FY24-25E, the brokerage firm said. It retains ‘Buy’ rating on the stock with a target price of Rs 1,450 per share.