Buy Indian Bank; target of Rs 220: Emkay Global Financial

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26 Aug, 2025 12:21

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Emkay Global Financial's report on Indian Bank

Indian Bank reported a miss on PAT at Rs6.9bn vs. our estimate of Rs8.7bn, mainly due to higher provisions, as the bank shored up its PCR in line with large peers to 72%, including on Srei Infra (100% PCR). Asset quality was a mixed bag, with the GNPA ratio down 43bps qoq to 9.1%. However, restructuring remains elevated at 5% of loans. The bank claimed that the relapse rate from the restructured book remained low at 3%. Loan growth was moderate at 3% yoy, which the bank expects to improve to ~8% in FY22, calling for better growth run-rate in Q4. NIM improved 14bps qoq to 3%, mainly due to lower interest reversal on NPAs and yield on the balance with the RBI. Fresh slippages remained elevated in Q3 at Rs27bn (3% of loans) due to higher retail/corporate slippages. Slippages may remain elevated in 4Q in case Future Retail slips, to which the bank has exposure to the tune of Rs9bn (15% PCR). Factoring in higher LLP, we cut our FY22E EPS by 3%. However, we expect the bank to deliver healthy RoA/RoE of 0.8%-13% by FY24E.

Outlook

We believe that Indian Bank is one of the best mid-cap PSBs, with strong capital ratios and liability profile, as well as the ability to deliver strong return ratios as growth accelerates. Retain Buy with a TP of Rs220, based on 0.7x Dec’23E ABV, offering 38% upside from CMP.

More Info

At 13:59 hrs Indian Bank was quoting at Rs 152.55, up Rs 0.70, or 0.46 percent.

It has touched an intraday high of Rs 154.65 and an intraday low of Rs 151.25.

It was trading with volumes of 76,801 shares, compared to its thirty day average of 318,758 shares, a decrease of -75.91 percent.

In the previous trading session, the share closed down 1.17 percent or Rs 1.80 at Rs 151.85.

The share touched its 52-week high Rs 194.80 and 52-week low Rs 96.20 on 26 October, 2021 and 19 April, 2021, respectively.

Currently, it is trading 21.69 percent below its 52-week high and 58.58 percent above its 52-week low.

Market capitalisation stands at Rs 18,999.20 crore.

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