Buy IndusInd Bank; target of Rs 2097: KR Choksey

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26 Aug, 2025 12:21

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KR Choksey's research report on IndusInd Bank

IndusInd Bank (IIB) reported a strong operational performance with advances growth of 32% yoy/8% qoq, led by robust traction in both corporate banking (+35% yoy/10% qoq) and consumer finance (+29% yoy/+5.6% qoq). Despite the above-industry growth, IIB witnessed NIM compression; contracted by 6 bps qoq/8 bps yoy to 3.94% resulting in NII growth lagging at 21% yoy/4% qoq. 25 bps increase in cost of funds qoq was disproportionately larger, offsetting 13 bps increase in advances yield. However, as re-pricing of the back-book catches up, we expect NIM pressure to subside. Opex at INR 15.3 bn grew 11% yoy/1% qoq translating into C/I of 43.4% (-80 bps qoq, -230 bps yoy). Despite strong PPOP growth of 22% yoy/4% qoq to INR 20 bn, heavy provisioning weighed down on bottom-line profitability. Provisioning at INR 5.9 bn (including INR 2.8 bn towards ILFS) translated into credit costs of 102 bps (vs. 63 bps average for preceding 5 qtrs). The bank continued to improve on its asset quality with GNPAs at 1.09%, down 6 bps qoq / NNPAs at 0.48%, down 3 bps qoq. Net accretion to GNPAs during the quarter was INR 0.4 bn (11 bps net slippage). Capital adequacy stood at 14.28%, consuming ~40 bps since last quarter.

Outlook

We continue to remain positive on IIB however exposure to ILFS and the uncertainty regarding the same are seen as key risks. Based on 4x FY20E ABVPS of INR 524 per share, we value the bank at 2,097 per share. We maintain BUY.

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