IndusInd Bank Share Price Could Reach Rs 1,500: Prabhudas Lilladher Suggests BUY Call
Prabhudas Lilladher has issued a BUY recommendation for IndusInd Bank, setting a target price of Rs 1,500. Despite a 6% miss on core profit due to lower-than-expected net interest income (NII) and fees, the bank showcased resilience with stable asset quality metrics. Loan growth, supported by strong disbursals, and improved collection efficiency suggest positive prospects. Prabhudas Lilladher foresees robust performance for the bank in upcoming quarters.
Core Earnings Miss and Asset Quality Performance
Core PAT fell 6% short of Prabhudas Lilladher's estimates, mainly due to lower NII, which stood at Rs 52.3 billion, falling below the projected Rs 53.2 billion. Similarly, net interest margins (NIMs) were recorded at 4.28%, slightly lower than expected.
However, asset quality exceeded expectations, with gross slippages at 256 basis points, 12 bps below forecasts. Provisions stood at 201 bps, lower by 6 bps, highlighting efficient risk management.
MFI Portfolio Stabilizes
The bank's microfinance (MFI) portfolio, which witnessed significant contraction in the second quarter, has now stabilized at Rs 325.6 billion. Disbursals rose to Rs 92 billion, marking a recovery from the Rs 70 billion recorded in Q2 FY25.
Collection efficiency improved to 94.9%, compared to 93.4% in the prior quarter, while the 30-90 day past due (dpd) segment remained stable at 4%. Prabhudas Lilladher anticipates further improvement in the coming quarters.
Loan Growth Expected to Accelerate
The bank is positioned for 4% quarter-on-quarter credit growth in Q4 FY25. Disbursals in the vehicle finance (VF) segment surged by 25% QoQ, which is expected to sustain momentum. Enhanced cash flow in the MFI segment is likely to contribute to improved credit uptake.
Loan-to-deposit ratio (LDR) stood at 89.6%, indicating a balanced funding structure. Retail deposits are being prioritized over bulk deposits, with the share of the top-20 depositors declining to 15.4% from 16.1%.
Detailed Financial Performance
Below is a summary of IndusInd Bank’s key quarterly financial metrics:
| Metric | Q3 FY25 | Q2 FY25 | YoY Growth |
|---|---|---|---|
| Net Interest Income (NII) | Rs 52,281 million | Rs 53,473 million | -1.3% |
| Operating Profit | Rs 35,989 million | Rs 35,918 million | -10.1% |
| Provisions | Rs 17,436 million | Rs 18,201 million | -4.2% |
| Profit After Tax (PAT) | Rs 14,013 million | Rs 13,255 million | -39.0% |
Outlook and Conclusion
Prabhudas Lilladher maintains a positive outlook on IndusInd Bank, with expectations of improved NIMs and loan growth in the coming quarters. The target price of Rs 1,500 reflects strong fundamentals and earnings potential. Investors seeking medium-to-long-term gains may consider accumulating the stock at current levels.
IndusInd Bank's strategic initiatives in enhancing asset quality, coupled with stable collections and expanding retail deposits, bolster its growth trajectory amidst evolving market conditions.
