Hold IndusInd Bank; target of Rs 818: Deven Choksey

Devan Choksey's research report on IndusInd Bank

Net Interest Income came in INR 30,483 Mn., down 43.3% YoY (-41.7% QoQ), was lower than our estimates led by reversal of accumulated interest income in the microfinance portfolio. PPOP stood at INR -4,909 Mn., down 112.0% YoY (-113.6% QoQ), sharply lower than our estimates led by lower NII, lower non-interest income (led by reversal of fee income) and higher operating expenses. Net profit stood at INR -23,289 Mn., down 199.1% YoY (-266.1% QoQ). IndusInd reported loss sequentially, led by one-off provisions on account of discrepant accounting for derivates traded between FY16-24. We have revised our FY26E/FY27E ABV by -9.8%/-14.7% respectively, as we factor in the adverse impact of significant income reversals linked to accounting irregularities, a deteriorated loan mix driven by elevated microfinance stress, and the ongoing regulatory scrutiny, which raises the possibility of further regulatory actions.

Outlook

We value IndusInd Bank based on 0.9x FY27E ABV, implying a target price of INR 818, providing an upside potential of 3.1%. We reiterate and maintain our “HOLD” rating on the stock.