IndusInd Bank share price today: Sharekhan maintained a Buy rating with a revised price target of Rs 1340

IndusInd Bank share price today: IndusInd Bank has a strong asset quality position (with front-loaded provisions) that has led to an improved balance sheet. Healthy capitalisation places it well to capture growth in FY22E and FY23E. A sequential improvement by IndusInd Bank in collection efficiency (CE) (overall vehicles CE is at 96.9%, while for MFIs it is at 94.4%) augurs well. A sharp rise in reported GNPA/NNPA numbers of IndusInd Bank, which came at 1.74%/0.22%, down 47 bps/30 bps qoq. Even on a proforma basis, GNPA/ NNPA ratio is at 2.93%/0.70%, respectively, are well-contained, and is positive. The current share price of IndusInd Bank is Rs 1047, down Rs 11 or 1%.

IndusInd Bank has strengthened its balance sheet by improving provision coverage ratio to 87% as of December 2020. Provisions and contingencies for Q3 FY21 comprising provisions for credit and other losses were Rs. 1,853 crore of provisions as compared to Rs 1448 cr in Q2 FY21. Total provisions (comprising specific, floating, general and standard asset provisions) stood at 188% of GNPAs and 111% of proforma GNPAs and are a cushion in the present environment.

IndusInd Bank’s ‘BBB and below-rated’ exposures are well-collateralised with a five-year average slippage of 0.4%, which will help contain NPAs. The bank has strengthened its balance sheet by improving its provision coverage ratio and the recent capital raise has also helped. Going forward, we expect credit cost and advances growth for FY2022E to be normal and hence believe that the bank’s improved position vis-à-vis its balance sheet. We have tweaked target multiples to pre-COVID levels, in light of an improved outlook. Sharekhan maintains a Buy rating on the stock with a revised price target of Rs 1340.

IndusInd Bank Key Risks:

Rise in slippages and delay in recoveries from stressed corporate loan book and slower growth in retail/MFI loan book may impact earnings.