January 18, 2017 / 15:34 IST
IIB has fared well over the years in terms of asset quality with the GNPA ratio improving from 3.1% in FY08 to 1% by FY11 and maintained at 0.9% now. Diversification led to a steady performance on the asset quality front. Concerns surrounding the CV portfolio (16% of loans) are receding. Going ahead, we expect GNPA ratio to remain steady at 1% by FY18E.
Outlook
IIB has continued to deliver a strong performance leading to continuous re-rating in multiple. Normalised return ratios of 18% RoE and 2% RoA provide comfort. We largely maintain our estimates and expect PAT to grow at 23% CAGR to Rs 3450 crore by FY18E. The bank is well placed to benefit from higher business momentum maintaining stable margin and lower capital usage, which will entail improvement in return ratios. Therefore, we maintain our target price of Rs 1350 assigning multiple of 3.5x FY18E ABV. We maintain BUY recommendation.
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