Buy IndusInd Bank; target of Rs 811: IIFL

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26 Aug, 2025 12:21

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IIFL`s research report on IndusInd Bank“IndusInd Bank’s loan growth is set to accelerate from FY16 driven by growth revival in its consumer financing segment (43% of loan book). This segment has witnessed a significant moderation in growth (from 48% yoy to 8% yoy over the past two years) impacted by severe growth slowdown in vehicle financing (segmental contribution at 75%) and equipment financing (segmental contribution at 11%) portfolios. With the underlying industry volume growth in passenger cars and 2Ws improving and demand for CVs, UVs and 3Ws expected to strengthen on the back of economic recovery, the vehicle financing portfolio growth is set to accelerate from current abysmal level of 2‐4% yoy. Similarly, improvement in construction and mining activity should drive growth in the equipment financing portfolio. Growth in other consumer financing products such as credit cards, LAP, etc would continue to remain high given a benign base and low penetration amongst bank’s clients.” “During FY12‐14, when the growth in consumer book was weakening, IndusInd Bank pushed growth through its corporate & commercial Banking segment (2‐ year CAGR at 35%). Growth in this segment was well‐distributed between large corporate (segmental contribution at 50%), mid corporate (segmental contribution at 31%) and small corporate (segmental contribution at 19%) lending. The bank mainly has exposure to short‐term working capital loans. We estimate bank’s advances to witness a robust 25% CAGR over FY14‐17 and the share of consumer financing segment (currently at a multi‐quarter low of 43%) to increase to 45% by FY16 and 47% by FY17.” “Indusind Bank’s loan growth is set to accelerate from FY16 driven by growth revival in its consumer financing segment. With underlying industry volume growth incrementally improving, growth in vehicle financing portfolio is likely to pick‐up over coming quarters. Though corporate and commercial loan growth would remain healthy, a much faster growth in consumer financing would shift the loan mix towards the latter segment from FY16. NIM has scope to expand further in the longer term aided by the loan mix shift, persistent CASA gains, softening of wholesale funding rates and structural resistance in lending yield. This along with buoyant fee growth should enable IndusInd Bank to sustain cost/income ratio despite continued investments in network expansion. Bank’s asset quality has been resilient in this credit cycle and with delinquencies expected to moderate, credit cost is likely to ease. We estimate RoA to expand to 2% by FY17 thus driving a robust earnings CAGR of 29%. With IndusInd Bank offering the best growthprofitability trajectory, its valuation should re‐rate towards 3x FY17 P/ABV in the longer term. Reiterate BUY with a 24‐month price target of Rs811,” says IIFL research report.

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