Buy IndusInd Bank; target of Rs 1050: Emkay Global Financial

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Improving asset quality: IndusInd Bank's asset quality is improving, with a moderation in slippages to 1.6% and a decline in the GNPA ratio to 2.7%. The bank has adequate provisions in place and will consider raising capital at an appropriate time.
  • Robust retail growth: The bank's retail advances grew 13% yoy, driven by healthy traction in secured retail and MSME, with a focus on portfolio quality and risk-adjusted returns.
  • Expected margin recovery: The bank's NIM declined 34bps due to FCNR(B) mobilization, but the management expects margins to improve in 2HFY27, supported by growth in higher-yielding segments and liability-side optimization.
  • Liability-side optimization: The bank has optimized its liability mix by replacing higher-cost bulk funding and reducing CDs to 3.3% of deposits from 5.9% in 1Q.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for:

  • Asset quality trends: Improvement in slippages and GNPA ratio, indicating the bank's ability to manage its asset quality.
  • Retail growth momentum: Continued growth in retail advances, driven by secured retail and MSME, with a focus on portfolio quality.
  • Margin expansion: Improvement in NIM, driven by growth in higher-yielding segments and liability-side optimization.
  • Liability-side optimization: Further reduction in CDs and optimization of the liability mix, supporting margin recovery.