Buy IndusInd Bank; target of Rs 1750: Prabhudas Lilladher

Prabhudas Lilladher's research report on IndusInd Bank

IIB saw a soft quarter.While core PPoP and PAT were in-line, NIM missed PLe by 9bps due to (1) impact of penal interest, (2) higher funding cost and (3) lower loan yields led by muted retail growth and higher liquidity. Asset quality was a drag as GNPA rose QoQ by 10bps on account of protracted recoveries. Credit growth was muted at 1.3% QoQ since business was impacted in Apr’24 and May’24 owing to general elections and seasonality. However, credit flow improved in Jun’24, which should sustain. While the bank guided for loans to grow by 18-23% and deposit accretion at 17-18% with LDR of 88-90%, we expect sustainable LDR to be lower at 87.0-87.5% given the risk profile of IIB. This would translate to loan/deposit CAGR of 16%/17% over FY24-26E.

Outlook

As per the bank, the draft RBI circular could reduce LCR (122%) by 4-6%. Contingent provisions stood at Rs10bn or 29bps. Tweaking multiple to 1.7x from 1.8x on Mar’26 ABV, we slightly cut TP to Rs1,750 from Rs1800. Retain BUY