Buy IndusInd Bank; target of Rs 1,080: Axis Securities

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26 Aug, 2025 12:21

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Axis Securities’ Research report on IndusInd Bank

IndusInd Bank (IIB) continued to report a robust PAT growth of 30% YoY (Rs 5.8 bn), well supported by higher than expected NII growth (36% YoY). NII growth was supported by 3 bps QoQ uptick in margin (3.9%) and ~29% YoY growth in advances. Going ahead, we believe NIM is likely to face some pressure as it moves to the new base rate calculation methodology (based on marginal cost). Advances growth was driven broadly by both corporate as well as retail book. Contribution of retail to overall loan book is 42% and management continued to guide to re-balance the loan portfolio to 50:50 (corporate:retail) as vehicle disbursements picks up further and traction in non-vehicle retail loans continues. Though slippages (1.6% of loans vs. 1.3% in Q2) increased, asset quality remained largely stable. Q3FY16 key highlights: Retail business is doing well with a growth of 27% YoY, largely contributed by MHCVs, high yielding two wheeler loans and non-vehicle retail book thereby leading to a better diversification

Core fee income growth was robust at 30% YoY and management is confident of achieving a growth rate above advances growth. Contribution from third party insurance sales to be accretive with induction of a new partner. Fees from retail business has a share of ~35%

Accretion in SA deposits continued with IIB adding Rs 10.8 bn during Q3 (32% YoY growth) leading to a stable CASA ratio of 35% (up 26 bps QoQ)

The bank has invested heavily in branch network (added 51 branches in Q3 to 905) and is on track to achieve its 1,200 branch network target by FY17. Incorporating the impact of cost from new branch addition, management guides to maintain its cost to income ratio at 45-47%

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Management continued to maintain its guidance of 60 bps of credit cost in FY16 (43 bps in 9MFY16)

Maintain BUY with TP of Rs 1,080: We maintain BUY rating with TP of Rs 1,080 (3.4x FY17E ABV), implying 18% upside from CMP of Rs 913. The stock trades at 3.2x/2.8x FY16E/FY17E ABV of Rs 282/Rs 321.

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