Buy IndusInd Bank; target of Rs 720: Prabhudas Lilladher

Prabhudas Lilladher's research report on IndusInd Bank

IIB reported a PAT of Rs6.63bn better than Q1FY20 but slightly lower than expectations (PLe: Rs8.5bn) as it continued to keep provisions on higher side related to COVID-19 (Rs9.5 bn). Few positives were (i) Deposits accretion was quite good with CASA growth of 8% QoQ (ii) PCR at 77% (pro-forma at 73%) and (iii) bank holds 118bps of loans as additional provisions (without standard assets). We get incremental comfort on improving collection efficiency with 94-95% in Sep and higher in Oct’20, though lagging in both MFI & some segments of VF. While, restructuring also is expected to be in single digits. We have tweaked our estimates on credit cost to 300bps from 220bps frontloading provisions in FY21 and continued uncertainty impact.

Outlook

We see lower case of conversion of warrants to promoter and incorporate recent capital raising in our estimates having net impact to BV by Rs50. We maintain BUY with revised TP of Rs720 (from Rs680) based on 1.2x Sep-22 ABV from 1.1x Mar-22 ABV.