Emkay Global Financial's research report on IndusInd Bank
We met Sumant Kathpalia, MD and CEO of IIB, to discuss the progress on the bank’s Planning Cycle 6 and its strategy to deliver sustainable and profitable growth. He reiterated the bank’s unwavering focus on building a strong retail liability franchisee (add more than 1,000 branches), balanced credit portfolio mix with a higher share of AHL/SME/Cards, micro-banking vs. micro-finance and, thereby, sustainable RoAs (1.8-2.2%). The bank is keen on building a strong wealth management business, including AMC, and remains open to the inorganic route. Sumant is keen on full-term extension beyond Mar-25, while the bank has appropriate succession planning in place across the top and middle management to avoid any business disruption. We have raised our earnings estimates by 1-4% over FY24-26E, factoring better growth/lower LLP and expect the bank to deliver healthy RoA @ 1.9-2%/RoE @ 16-18% RoE. The bank carries healthy contingent provision (0.5% of loans) as well as capital buffers (CET 1 at 16.3%), while any infusion by promoters to increase stake should further boost capital levels.
Outlook
Factoring in better earnings/RoE trajectory and margin stability amid the risk of contraction among peers, we upgrade the TP to Rs2,000/share from Rs1,825/share, rolling forward its P/ABV on 2.1x Dec-25E ABV vs. 2x Sep-25E earlier.
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