Buy IndusInd Bank; target of Rs 1200: Religare

Religare is bullish on IndusInd Bank (IIB) and has recommended buy rating on the stock with a target price of Rs 1200, in its research report dated July 13, 2015.

July 15, 2015 / 15:19 IST

26 Aug, 2025 12:21

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Religare's report on IndusInd Bank (IIB)

IIB’s Q1FY16 reported PAT grew 25% YoY to Rs 5.3bn – marginally ahead of our estimates. Loan growth was strong at 23% YoY and margins stable at 3.7%. The tier 1 ratio was up 33bps QoQ to 11.55% and should improve further as the bank has raised capital in Jul’15. RWA/total assets continued to decline (-400bps in last two quarters) with loan mix changes likely to drive further improvement. Asset quality was stable as the stressed assets proportion remained sub-1%.

IIB’s tier 1 improved by 33bps QoQ due to a reduction in market risk (lower MTM, higher G-sec portfolio), regulatory relief on retail loans, lower non-fund based exposure and an increase in overall ratings of the corporate book. The RWA/total assets ratio declined by 400bps in last two quarters, with management expecting further improvement in FY16 due to a change in the loan mix in favour of retail loans. Post capital raising (QIP + preferential allotment to promoters), the bank’s tier 1 will improve to 16%+, supporting loan growth ahead.

IIB’s loan book grew by 23% YoY (corporate +27%, retail +18%). CV/equipment financing books grew at 7%/13% sequentially, which is impressive and shows signs of a revival in the CV/CE segments. The bank’s reported margin of 3.7% remained stable QoQ.

Asset quality stable QoQ: GNPA and NNPA remained largely stable QoQ. Credit costs however were higher during the quarter due to amortisation of ARC losses amounting to Rs 320mn. Restructured assets increased QoQ to 0.63% of total advances, albeit off a low base, from 0.53% in Q4FY15. IIB’s exposure to lease rental discounting increased from 3.9% in Q4FY15 to 5.1% in Q1FY16.