Hold IndusInd Bank; target of Rs 625: ICICI Direct

ICICI Direct recommended hold rating on IndusInd Bank with a target price of Rs 625 in its research report dated November 01, 2020.

Broker Research

November 07, 2020 / 11:56 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on IndusInd Bank

The overall asset quality performance was encouraging as GNPA and NNPA ratio declined by 32 bps and 34 bps to 2.21% and 0.52%, respectively. Even on a standstill asset classification, asset quality performance remained healthy as GNPA and NNPA were at 2.32% and 0.61%, respectively. Application for restructuring is minimal at ~5 bps of advances and is further expected to remain in low single digits at the end of December 2020. The bank witnessed lower delinquencies in Q2FY21 as account of Rs 399 crore slipped into NPA compared to Rs 1537 crore in the previous quarter. Slippages from the corporate book were miniscule at Rs 13 crore while remaining Rs 386 crore came in from the consumer segment. SMA 1, 2 book were at ~23 bps, 10 bps, respectively. Collection efficiency for September 2020 was at 94.7% and 95-96%, respectively, in October 2020, which is further expected to improve further.

Outlook

Post balance sheet realignment, the management is geared to pedal growth ahead with focus on certain segments. Thus, we expect business momentum to pick from here on with operational parameters expected to show improvement. Improving collection efficiency and ample provision buffer is expected to arrest volatility in earnings but return ratios are seen improving gradually to 9.3% in FY22E. Further, quantum of advances to be restructured remain key monitorable. Therefore, until clarity emerges on asset quality front, we maintain our HOLD rating with a revised target price of Rs 625, valuing the stock at 1.2x FY22E ABV.

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