The Private Sector Bank industry in India is witnessing significant growth, with a 20% increase in deposits as of FY24, holding 34% of the total scheduled commercial bank deposits. The sector comprises 21 banks, contributing to a robust retail credit market projected to grow at over 8% CAGR from 2024 to 2029.
With a market capitalization of Rs 81,591.74 crore, the shares of IndusInd Bank Ltd were trading at Rs 1,047.40 per share, decreasing around 0.66 percent as compared to the previous closing price of Rs 1,054.40 apiece.
Brokerage Recommendations:-
Emkay Global Financial Services, one of the well-known brokerages in India, gave a ‘Buy’ call on the stock with a target price of Rs 1,047.40 apiece, indicating a potential upside of 57 percent from Tuesday’s price of Rs 1,047.40 per share.
Here is the rationale for this bullish upside movement of 57%:-
● Credit growth slowed to 13.2% year on year and 2.7% quarter on quarter, owing mostly to a targeted decrease in unsecured loans and certain retail areas such as two-wheelers, commercial vehicles, and cards. MFI loan disbursements dropped to Rs 70 billion in Q2.
● Management forecasts that the slower pace will continue into Q3, with a comeback expected in Q4 as asset quality requirements relax. Margins, which had previously been stable, fell 17 basis points quarter on quarter to 4.08% due to decreased loan-to-deposit ratios and interest rates.
● Asset quality deteriorated, notably in the unsecured market, with additional slippages rising to Rs 18 billion (2% of loans) from 1.8% in Q1. The increase in the GNPA ratio was restricted to 2.1% due to greater recoveries and write-offs.
● Moreover, during Q2, the bank increased its contingent provision Rs 5.25 billion, including Rs 2.5 billion set aside for MFI loans. Management is positive about relief in Q4, as MFI disbursements are likely to rise, with the 30-90 DPD MFI PAR book at 4%.
Management Insights:-
Management is optimistic about achieving 18-23% growth for FY25, despite a challenging Q1. The company’s approach towards microfinance and vehicle finance is due to external factors, but confident in the recovery. The company focuses on asset quality and maintaining a balance between traditional and new initiatives to drive growth ambitions.
Company profile:-
IndusInd Bank Ltd is engaged in providing financial services. The bank offers a wide range of products and services for individuals and corporations, including microfinance, personal loans, personal and commercial vehicle loans, credit cards, and small to medium enterprises loans.
Written by:- Abhishek Singh
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