Result Update

October 12, 2015

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

IndusInd Bank (INDBA)

Buy
| 1050
12 months
11%

Core strength sustains.

Whats Changed?
Target
EPS FY16E
EPS FY17E
Rating

Changed from | 1030 to | 1050

Changed from | 38 to | 39.5
Changed from | 46 to | 49.5
Unchanged

Quarterly Performance
NII
Other income
PPP
PAT

Q2FY16
1,094.0
783.5
1,006.3
559.8

Q2FY15
832.8
593.6
724.1
429.6

YoY (%)
31.4
32.0
39.0
30.3

Q1FY16 QoQ (%)

980.7
11.6
761.6
2.9
960.0
4.8
562.3
-0.5

Key Financials
| Crore
NII
PPP
PAT

FY14
2,890.7
2,596.0
1,408.5

FY15
3,420.3
3,098.2
1,794.1

FY16E
4,257.8
3,963.2
2,327.6

FY17E
5,172.6
4,853.7
2,919.8

FY14
35.2
39.2
5.6
6.2
16.9
1.8

FY15
27.8
31.0
4.8
5.3
18.2
1.8

FY16E
23.9
26.6
3.2
3.6
16.5
1.9

FY17E
19.0
21.2
2.8
3.1
15.5
2.0

Valuation summary
P/E
Target P/E
P/ABV
Target P/ABV
RoE
RoA

Stock data
Market Capitalisation
GNPA (Q1FY16)
NNPA (Q1FY16)
NIM (Q1FY16)
52 week H/L
Equity Capital
Face Value
DII Holding (%)
FII Holding (%)

| 54924 Crore
| 602 Crore
| 205 Crore
3.88
989 /617
| 590 Crore
| 10
9.4
37.0

Price performance (%)

Return %
Yes Bank
Axis Bank
Indusind Bank

1M
1.3
0.9
9.6

3M
-9.3
-14.2
5.3

| 945

6M
-13.8
-14.3
-0.4

12M
25.4
26.6
50.1

Research Analyst
Kajal Gandhi
kajal.gandhi@icicisecurities.com
Vasant Lohiya
vasant.lohiya@icicisecurities.com
Vishal Narnolia
vishal.narnolia@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Profit grew 30% YoY to | 560 crore, marginally higher than estimate
of | 550 crore, mainly led by better NII and other income growth
During the quarter, | 4100 crore of the acquired diamond and
jewellery portfolio positively impacted credit growth, NII and NIM
Strong business growth continued with credit increasing 31% YoY to
| 78294 crore as expected. Deposit grew 22.5% YoY to | 80840 crore
vs. 21% estimate. CV financing picked up with 28% YoY and 8%
QoQ growth to | 12360 crore. This led NII to be higher-thanestimated at | 1094 crore vs. | 1031 crore, surging 31.4% YoY in
Q2FY16. Margins were better-than expected at 3.88% vs. 3.68%
QoQ. Capital raising of ~| 5000 crore in July 2015 helped boost NIM
Asset quality remained stable with GNPA ratio declining 2 bps to
0.77% QoQ with slippages incrementally coming from the corporate
sector. NNPA remained stable ~0.31% (| 210 crore vs. | 201 crore
QoQ). The restructured book was maintained at 0.63% of advances
Turnaround done successfully; growth ahead of industry to sustain
After taking over in early 2008, the current management has transformed
IndusInd Bank (IIB) from low and volatile B/S growth to steady and
sustainable growth with strong profitability. We like the fact that the
transformation has been a qualitative one (RoA up from 0.3% to 1.8% as
on FY15) despite the turbulent economic scenario. The loans, deposits
and PAT traction improved to 27%, 21% and 57% CAGR in FY08-15 from
12%, 13% and -35% in FY05-08, respectively. The loan and deposit grew
30.6% and 22.5% to | 78294 crore and | 80840 crore, respectively, as on
Q2FY16. IIBs loan mix is 41% consumer finance (CF) (~80% of which is
high vehicle financing) and 59% corporate banking (CB) (working capital
in nature and well diversified across industries). We factor in 25% loan
CAGR over FY15-17E to | 106820 crore.
Margins improve sharply; marginal cost largely factored in
IIB maintained calculated NIM of over 3.7% in the past while Q2FY16 NIM
was at 3.88%. In past six years, reported NIM improved from 1.7% to
3.7% as on FY15. Such a structural improvement was led by
improvement in CASA franchise (doubled to >30% in the past six years),
helping keep CoF under control across various cycles. It already uses a
hybrid of marginal CoF & average CoF in base rate, implying impact of
new base rate is seen minimal with 72% of book being fixed. We expect
calculated NIM to stay healthy at ~3.8% levels by FY17E.
Diversified asset book enables superior asset quality
IIB has fared well over the years in terms of asset quality with the GNPA
ratio improving from 3.1% in FY08 to 1% by FY11 and maintained 0.77%
now. Diversification led to steady performance on the asset quality front.
Concerns surrounding CV portfolio (16% of loans), is not visible. Going
ahead, we expect GNPA ratio to rise to 0.9% at | 1013 crore by FY17E.
Better visibility in earnings than peers provides comfort; maintain BUY
IIB continued to deliver a strong performance leading to continuous rerating in multiple. Normalised return ratios of ~18% RoE, 2% RoA
provide comfort. PAT CAGR is seen at 28% to | 2958 crore by FY17E.
Capital raising (~| 5100 crore) led to RoE decline of ~350 bps to 16%.
We have tweaked our estimates as we factored in | 4100 crore acquired
gems & jewellery portfolio, which led to a marginal increase of | 4/share
in FY17E ABV to | 336. Accordingly, our target price is revised to | 1050
(|1030 earlier) valuing at 3.1x FY17E ABV. We maintain BUY.

Variance analysis
Q2FY16 Q2FY16E
NII

Q1FY16

1,031

833

31.4

981

3.88

3.65

3.63

25 bps

3.68

Other Income

784

699

594

32.0

762

1,878

1,730

1,426

31.6

1,742

301
571

281
518

239
463

25.7
23.2

272
510

1,006

931

724

39.0

960

Staff cost
Other Operating Expenses
PPP

YoY (%)

1,094

NIM (%)

Net Total Income

Q2FY15

Provision
PBT
Tax Outgo
PAT

158
848
288
560

105
826
274
553

73
651
221
430

116.0
30.3
30.3
30.3

Comments
NII traction was higher-than-expected largely due to higher-than-expected traction in
11.6 loans and margins
Margins improved seqentially on the back capital raised (~| 5100 crore), improvement
20 bps in CASA ratio and increase in CV portfolio which is high yielding

QoQ (%)

Higher-than-expected growth in other income was on account of higher core fee income,
which increased 32% YoY. This was led by distribution fees (up 41% YoY) & processing
2.9 fees (up 61% YoY)
7.8
The cost to income ratio was at 46.4%. This quarter, the bank added 43 branches vs. 15
10.5 in Q1FY16. It indicated that it will achieve the target of 1200 branches by FY17
11.9
4.8

123.3
837
274.4
562.3

Credit cost was a bit higher-than -expected as the bank made standard asset
provisioning for gems & jewellery portfolio acquired. However, the management has
28.2 maintained the guidance of 60 bps for FY16E
1.4
5.1
-0.5

Key Metrics

GNPA
NNPA

602
205

Total Restructured assets

493
Source: Company, ICICIdirect.com Research

599
238

655
195

-8.0
5.0

570.1
224.8

Asset quality was under control with headline GNPA ratio remaining steady sequentially.
Slippages were higher QoQ in corporate segment at | 73 crore as one new account
5.6 slipped this quarter while two other accounts slipped from restructured assets
-8.9

425

312

58.3

453.0

8.9 Restructured loans as a percentage of total credit was steady at 0.63% of total loans

Change in estimates
FY16E
New % Change
4,258
4.3
3,963
4.5

Old
4,084
3,794

NIM(%) (calculated)

3.7

3.8

11 bps

3.8

3.8

3 bps

2,240
294.9

2,328
295.7

3.9
0.3

2,721
332.9

2,920
335.6

7.3
0.8

PAT
ABV per share (|)

Old
4,943
4,616

FY17E
New % Change
5,173
4.6
4,854
5.2

(| Crore)
Net Interest Income
Pre Provision Profit

Comments
NII estimates increased as we factor in a rise in NIMs and credit traction
Margins are expected to improve due to an increase in high yielding retail portfolio &
improvement in CASA ratio
Capital raising in Q2FY16 was book value accretive; already factored in

Source: Company, ICICIdirect.com Research

Assumptions

Credit growth (%)

Deposit Growth (%)
CASA ratio (%)
NIM Calculated (%)
Cost to income ratio (%)
GNPA (| crore)
NNPA (| crore)
Slippage ratio (%)
Credit cost (%)

FY14
24.3
11.8
32.5
3.9
45.7
620.8
184.1
1.4
0.7

FY15
24.8
22.5
34.1
3.8
46.8
562.9
210.5
1.6
0.6

Current
FY16E
FY17E
25.4
23.9
22.7
19.2
35.1
37.1
3.8
3.8
45.2
44.5
778.5
1,013.5
213.0
268.8
0.8
0.8
0.6
0.5

Earlier
FY16E
21.5
21.3
35.0
3.7
46.2
730.0
188.7
0.7
0.5

FY17E
24.1
23.5
36.8
3.7
45.8
937.5
190.9
0.7
0.5

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

Company Analysis
Ideal loan mix; growth to be better than industry despite moderation
IIBs total credit book as on FY15 was at | 68788 crore. The credit traction
has been strong at 27% CAGR in the past six years and way ahead of the
industry, which grew at 18% CAGR. The composition/mix of the loan
book is ideal with the consumer finance (CF) book and corporate banking
book (CB book) accounting for 42% and 58%, respectively, as on FY15.
The bank has guided at maintaining 1:1 distribution of the total loan
between CF and CB book, going ahead.
We expect advances growth to stay well above the
system at 24.6% CAGR over FY15-17E to | 106820 crore

The CF book, amounting to | 31955 crore as on Q2FY16, is well

diversified (see exhibit 1) but remains largely vehicle finance focused
(~80% of CF book). Going forward, we expect the CF book to be a major
driver of overall loan book traction. We factor in 27.1% CAGR in the CF
book over FY15-17E to | 45874 crore with back-end growth.
Exhibit 1: CV portfolio witnessing traction; absolute book increases by | 955 crore QoQ
Consumer Finance Book
| crore
Comm. Vehicle
Utility Vehicle
Three Wheelers
Two Wheelers
Car loans
Equip. financing
Credit card
Loan against prop.
Personal.others etc
Total
YoY Growth

FY13
9,970
1,789
2,121
1,919
2,051
2,708
342
1,401
100
22,401
30

FY14 Q1FY15
9,614
9,638
2,050
2,059
1,932
1,892
2,512
2,606
2,642
2,758
2,854
2,885
457
503
2,473
2,691
251
332
24,785 25,364
11
9

Q2FY15
9,685
2,013
1,889
2,688
2,906
2,795
536
3,023
430
25,964
7

Q3FY15
10,043
2,013
1,867
2,838
2,988
2,797
598
3,313
554
27,011
10

Q4FY15 Q1FY16 Q2FY16

10,618 11,405 12,360
2,017
2,043
2,037
1,843
1,860
1,938
2,808
2,829
2,857
3,146
3,293
3,539
2,816
2,827
2,861
698
786
885
3,705
4,032
4,331
761
932
1,147
28,412 30,007 31,956
15
18
23

Source: Company, ICICIdirect.com Research

IIBs CB book at | 46339 crore as on Q2FY16 is largely inclined towards

working capital finance. Further, the book is broadly diversified into three
major categories (see exhibit 1) such as large corporate, mid-corporate
and loans to small business. Again, in terms of sectors, the CB portfolio is
well diversified among 13-14 sectors. We expect the CB book to post a
CAGR of 22.9% over FY15-17E to | 60946 crore.
During Q2FY16, traction in the mid corporate segment looks higher at
58% YoY as the bank incorporated the gems & jewellery portfolio of
| 4100 crore that was acquired from RBS. IIB already has such a portfolio
around | 1500 crore. With this acquisition, the bank becomes one of the
largest financiers in this segment across industry. This led to overall
advances traction strong at 30.6% YoY to | 78294 crore. Even after
excluding this portfolio the total loan growth was healthy at 24% YoY.
Exhibit 2: Corporate book increases at strong pace largely led by large & small business segment
Corporate Banking Book
| crore
Large corporates
Mid corporates
Small business
Total
YoY Growth

FY13
11,841
6,484
3,595
21,920
23.0

FY14
15,086
9,693
5,538
30,317
38.3

Q1FY15
16,800
10,190
6,310
33,300
38.3

Q2FY15
17,337
10,190
6,440
33,967
37.0

Q3FY15
18,732
10,576
7,528
36,836
32.4

Q4FY15
19,964
11,455
8,957
40,376
33.2

Q1FY16
21,475
11,885
8,876
42,236
26.8

Q2FY16
20,785
16,135
9,419
46,339
36.4

Source: Company, ICICIdirect.com Research

We raised our growth estimates and now expect the loan book traction to
stay ahead of industry at 24.6% CAGR over FY15-17E vs 22% earlier.

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 3: Overall advances growth expected to be ahead of industry

| crore
Total Advances
YoY Growth

FY13
44321
26.4

FY14
55102
24.3

Q1FY15
58664
23.7

Q2FY15
59931
22.4

Q3FY15
63847
21.7

Q4FY15
68788
24.8

Q1FY16
72243
23.1

Q2FY16
78294.5
30.6

Source: Company, ICICIdirect.com Research

We expect CASA CAGR of 26% over FY15-17E at | 40256

crore and expect CASA ratio to be 37.1%

Impressive improvement in liability franchise

IIBs deposits have also witnessed a sharp traction of 21% CAGR in FY0815 to | 74134 crore. More notable is the improvement in quality of the
liability franchise. The CASA ratio in the period has doubled to 34.7% of
deposits currently owing to a rising branch presence (up from 210 in FY10
to over 801 as on FY15), innovative services & SA deregulation in
Q2FY12.
Going ahead, we expect the deposit base to increase at 21% CAGR in
FY15-17E to | 108462 crore considering the system wide slowdown in
deposits. We have built in a CASA CAGR of 26% in FY15-17E to | 40256
crore and expect the CASA ratio at 37.1%. A major upside to our CASA
ratio estimates could be the opening up of the agency business of the
RBI, which would lead to a sharp increase in CA balances for the bank.
Currently, it is restricted to only a few large banks.
Exhibit 4: Deposit traction remains healthy; CASA improves further
| Crore
Savings
Current
Term
Total Deposits
YoY Growth
CASA Amount
CASA%

FY12
4,694
6,889
30,779
42,362
23.3
11,583
27.3

FY13
7,033
8,835
38,249
54,117
27.8
15,868
29.3

FY14
9,915
9,776
40,811
60,502
11.8
19,691
32.5

Q2FY15
11,392
10,971
43,633
65,996
24.4
22,363
33.9

Q3FY15
12,183
11,451
45,742
69,376
23.3
23,634
34.1

Q4FY15 Q1FY16 Q2FY16

12,944 14,016 15,046
12,356 12,929 13,039
48,835 50,748 52,755
74,134 77,693 80,840
22.5
21.6
22.5
25,300 26,945 28,085
34.1
34.7
34.7

Source: Company quarterly presentation, ICICIdirect.com Research

Margins to stay among best in class

IIBs FY15 calculated NIM of 3.8% is highest after HDFC Bank and Kotak
Mahindra Bank. We expect calculated NIMs to improve ~8-10 bps in
FY16E to ~3.8% on account of ~| 5100 crore funds raised via QIP. The
high yielding nature of the loan book as well as healthy CASA franchise
have enabled IIB to maintain such strong margins of ~3.6-3.7% for the
past four years.
In consumer financing, blended yields are ~16% while in the corporate
space yields are at ~11-12.5%. The overall reported yield on advances
came in at ~13-14%. In the past four or five years, the strong growth in
the CASA franchise has helped in managing to keep CoF (calculated) in
the range of 8.0-8.3% across cycles.
The management remains confident of maintaining quarterly NIMs at
healthy levels. We expect calculated margins to stay at ~3.8% levels by
FY17E.

ICICI Securities Ltd | Retail Equity Research

Page 4

Exhibit 5: Margins to stay healthy supported by improving CASA franchise

14

We have factored in calculated NIMs of 3.8% for FY16E

12

10.83

11.46

10.35

11.66

11.26

10.80

9.88

9.67

10.72

10.54

(%)

10
8.23

8.21

1.73

2.06

FY08

FY09

7.73

7.44

7.40

6.19

4
2

8.29

8.04
6.44

7.44

3.17

3.79

3.65

3.73

3.94

3.81

3.83

3.84

FY10

FY11

FY12

FY13

FY14

FY15

FY16E

FY17E

NIM (calculated)

Yield on average assets (calculated)

Source: Company quarterly presentation, ICICIdirect.com Research

CoF(calculated)

* YoA =Yield on Assets, CoF = Cost of Funds

Diversified book enables superior asset quality; expect slight glitch

The asset quality of IIB has fared well over the years. GNPA and NNPA
ratios have declined from 3.1% and 2.3% in FY08 to 1% and 0.3% by
FY11, respectively. They have remained at these levels currently. The
steady performance is owing to IIBs peculiar loan mix. The CB book
mainly consists of loans towards working capital, which is less risky than
term loans. Further, the CB book is well diversified with exposure to
stressed sectors such as iron & steel, commercial real estate (CRE),
power, etc. at lower levels of ~1-2%. Also, the asset quality has been
manageable in the CF book, which constitutes the balance half.
In absolute terms, GNPA and NNPA were at | 562 crore and | 212 crore,
respectively, as on FY15. Restructured assets (RA) at | 365 crore as on
FY15 account for only 0.5% of the total loan book, which is one of the
lowest in the industry. Credit cost has been in a declining trend (down
from 84 bps in FY09 to 48 bps in FY15).
We expect absolute GNPA and NNPA of | 1013 crore and | 218 crore,
respectively, as on FY17E. Despite this, IIBs asset quality remains
manageable and appears better than the system. Credit cost is also
expected to be within the guided range of 60 bps over FY15-17E.
Exhibit 6: Asset quality remains acceptable
900
800
700
600
500
400
300
200
100
-

1.0

1.2

1.1
1.0 621
563

1.0
458

0.5
255

1.4

778

1.2

(%)

(| Crore)

We expect GNPA and NNPA ratios of 0.9% and 0.2%,

respectively, over FY15-17E

602

570
0.8

0.8

0.9

0.8

347
266
0.3

0.3

0.3

0.3

73

95

137

184

210

FY10

FY11

FY12

FY13

FY14

FY15

NNPA

0.8
0.6

0.3

102

GNPA

1.0

0.3

0.3

225

0.2

0.4

205

213

Q1FY16 Q2FY16

FY16E

0.2
0.0

GNPA ratio (RHS)

NNPA ratio (RHS)

Source: Company quarterly press release and annual report, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

Fee income: well diversified & growing at strong pace

IIBs other income constitutes ~40% of its operating income. In other
income, the major component is the fee income that accounts for ~90%.
Various sources of fee income include trade & remittances, forex income,
distribution fees, general banking, processing fees & investment banking
(IB). The bank also has a tie-up with HDFC Ltd for sourcing home loans on
its behalf for which it gets commission of ~1% and additional 0.2% in
insurance.
The other income witnessed a strong CAGR of 35%. In that, the core fee
income grew at 39% CAGR in the last four years to | 2087 crore as on
FY15. We have factored in total other income CAGR of 22% to | 3572
crore over FY15-17E.
Exhibit 7: Core fee income trend continues to be strong at 32% YoY
Other income break up (| Crore)
Core fee income
Securities/FX tradingothers

FY11 FY12 FY13 FY14 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16

629 913 1,239 1,610
509
522
569
599
673
85
92
107
263
49
88
90
125
110

Break up of fee income (| Crore)

Trade & Remittances
Foreing Exchange Income
Distribution Fees
General Banking
Loan Processing Fees
Investment Banking
Total

FY11 FY12 FY13 FY14 Q1FY15 Q1FY15 Q4FY15 Q1FY16 Q2FY16

88 118
169
214
62
62
80
56
84
111 201
285
435
140
169
110
159
170
161 245
270
281
85
98
127
107
119
88 110
139
145
41
42
45
49
41
124 161
233
291
90
91
111
104
145
58
79
143
242
93
59
96
123
114
629 913 1,239 1,610
510
522
569
599
673

Source: Company quarterly presentation, ICICIdirect.com Research

Exhibit 8: Expanding branch and ATM network

The bank added 43 new branches in this quarter and now

has 854 branches. Under Planning Cycle III, over FY14-17,
the bank plans to double its branch network to ~1200

1800
1600
1400
1200
1000
800
600
400
200
0

1487
1110

1238

1277

882
497

594

356
336
210
180
180

300

FY08

FY11

FY09

FY10

692
400

FY12

500

FY13

602

638

685

1543

1277

727

801

811

854

FY14 Q1FY15Q2FY15Q3FY15Q4FY15Q1FY16Q2FY16

Branches

ATM

Source: Company quarterly presentation, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

1578

Page 6

Outlook and valuation

IIB has, in the past three or four years, traded at premium valuations as
compared to its private sector counterparts, except HDFC Bank and Kotak
Mahindra Bank. This is due to a sustained and structural improvement in
earnings (up 3x in the last four years) and best in class return ratios with
RoE of ~18-19% and RoA of 1.6% in the past four years.
Further, the major factor on the back of which the stock got re-rated from
time to time was that such a strong performance has been accomplished
in a strained economic environment wherein the banking system has
been plagued by declining growth and increasing deterioration in asset
quality. IIB, owing to its ideal mix of the loan book (niche presence in
vehicle finance), improving CASA franchise and lower exposure to
stressed sectors was able to ring fence itself from major systemic
concerns and deliver strong results.
IIB continued to deliver a strong performance relative to peers despite a
weak economy in the past two or three years. This is clearly reflected in
its continuous re-rating in multiple. Normalised return ratios of ~18% RoE
and 2% RoA provide comfort. We factor in the recent capital raising
(~| 5100 crore), which is book value accretive by ~22% already factored
by us, while the RoE is expected to decline ~350 bps to 16% for FY17E.
We have tweaked our estimates as we factored in | 4100 crore acquired
gems & jewellery portfolio, which led to a marginal increase of | 4 per
share in FY17E ABV to | 337. Accordingly, our target price is revised to |
1050 (|1030 earlier) valuing at 3.1x FY17E ABV. Maintain BUY.
Exhibit 9: Valuation

FY14
FY15
FY16E
FY17E

NII
(| cr)
2,891
3,420
4,258
5,173

Growth
(%)
39.5
41.3
41.1
40.8

PAT
(| cr)
1,408.5
1,794.1
2,327.6
2,919.8

Growth
(%)
32.7
27.4
29.7
25.4

P/E
(x)
35.2
27.8
23.9
19.0

ABV
(|)
168.3
196.8
295.7
335.6

P/ABV
(x)
5.6
4.8
3.2
2.8

RoA
(%)
1.8
1.8
1.9
2.0

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 7

RoE
(%)
16.9
18.2
16.5
15.5

Company snapshot
1,200

Target Price 1050

1,000

800

600

400

200

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
FY04
Jan-07
Feb-08
Mar-09

Event
Ashok Leyland Finance (ALF), an NBFC, merged with IndusInd Bank, which enabled it to have a niche presence in the vehicle financing space
Aviva Life Insurance and IndusInd Bank announce their tie-up as bancassurance partners
A new management team headed by Romesh Sobti inducted from ABN Amro Bank NV, leading to a sharp turnaround of the bank
The new management focused on improving liability franchise as low cost CASA ratio improved from 15.7% in FY08 to 29.3% in FY13. On the lending side, it reduced
exposure to risky segments like unsecured loans and focused on high yielding-relatively less risky segments like CV, car loans, UV, three-wheelers, LAP, etc.

FY11
IndusInd Bank enters into an agreement with Deutsche Bank to acquire its credit card business in India
FY11
IndusInd Bank signs an MoU with HDFC Ltd for home loans
FY11
Planning Cycle I (FY08-FY11) successfully achieved; launches Planning Cycle II (FY11-14)
Dec-11
Savings rate deregulation in Q3FY12 wherein IIB offers higher rates (6% above | 1 lakh and 5.5% up to | 1 lakh)
FY13
Branch network touches 500 and launches Planning Cycle III (FY14-FY16)
Apr-13
On April 1, 2013, the bank included in the Nifty 50 benchmark index
May-13
IndusInd was the best performing stock in the banking industry as it rose from | 45 in FY09 to all-time high of | 523.
Jul-13
RBI tightens liquidity by raising MSF rate by 3% and various other measures. IndusInd impacted due to its high reliance on wholesale deposits (50%)
Sep-13
Arrival of new RBI Governor changes sentiment, eases a few of the tight liquidity measures due to which the stock of IndusInd bounces back
Jun-15
Raises around | 5000 crore via QIP (including allotment to promoters)
Source: Company, ICICIdirect.com Research

Top 10 shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Name
Hinduja Group
Prans Asset Management, Ltd.
Franklin Templeton Asset Management (India) Pvt. Ltd.
Icon Capital Limited
General Atlantic LLC
Goldman Sachs Asset Management International
Franklin Advisers, Inc.
Life Insurance Corporation of India
The Vanguard Group, Inc.
ICICI Prudential Life Insurance Company Ltd.

Shareholding Pattern
Latest Filing % OS Position (m) Change (m)
30-Jun-15 16.18
95.83
0.40
30-Jun-15 3.76
22.26
0.00
30-Jun-15 2.90
17.17
1.53
30-Jun-15 2.49
14.76
(0.25)
30-Jun-15 2.16
12.78
0.00
30-Jun-15 1.62
9.59
(0.69)
31-Jul-15 1.53
9.07
0.00
30-Jun-15 1.40
8.31
1.32
31-Aug-15 1.36
8.06
1.02
30-Jun-15 1.35
8.02
(0.44)

(in %)
Promoter
FII
DII
Others

Jun-14 Sep-14 Dec-14 Dec-14 Jun-15

15.19 15.13 15.12 15.12 15.04
43.59 43.20 40.59 40.59 38.58
8.57
8.63
8.97
8.97
9.41
32.65 33.04 35.32 35.32 36.97

Source: Reuters, ICICIdirect.com Research

Recent Activity
Investor name
Buys
HDFC Asset Management Co., Ltd.
DSP BlackRock Investment Managers Pvt. Ltd.
20th Century Holdings Pvt. Ltd.
Schroder Investment Management (Hong Kong) Ltd.
Franklin Templeton Asset Management (India) Pvt. Ltd.

Value
42.85m
28.96m
24.58m
23.48m
20.99m

Shares
3.32m
1.90m
1.89m
1.71m
1.53m

Investor name
Sells
Carmignac Gestion
APG Asset Management
William Blair & Company, L.L.C.
TIAA-CREF
Goldman Sachs Asset Management International

Value
-23.83m
-23.06m
-19.16m
-11.44m
-9.52m

Shares
-2.85m
-1.81m
-1.40m
-0.83m
-0.69m

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

Financial summary
Profit and loss statement

| Crore

(Year-end March)
Interest Earned
Interest Expended
Net Interest Income
Growth (%)
Non Interest Income
Fees and advisory
Treasury Income
Other income

FY14
8,253.5
5362.8
2,890.7
29.5
1890.5
1170.6
128.2
591.8

FY15
9,692.0
6271.7
3,420.3
18.3
2403.9
1548.4
117.7
737.7

FY16E
11,913.4
7655.6
4,257.8
24.5
2972.3
1958.8
148.3
865.2

FY17E
14,207.9
9035.3
5,172.6
21.5
3571.9
2428.9
188.4
954.6

Net Income
Employee cost
Other operating Exp.
Operating Income
Provisions
PBT
Taxes
Net Profit
Growth (%)
EPS (|)

4781.2
809.3
1376.0
2596.0
467.7
2128.3
719.8
1,408.5
32.7
26.8

5824.1
980.5
1745.5
3098.2
389.1
2709.1
915.0
1,794.1
27.4
33.9

7230.2
1271.2
1995.7
3963.2
473.6
3489.6
1162.0
2,327.6
29.7
39.5

8744.5
1386.8
2504.0
4853.7
515.2
4338.5
1418.7
2,919.8
25.4
49.5

Source: Company, ICICIdirect.com Research

Key ratios
(Year-end March)
Valuation
No. of shares (crore)
EPS (|)
DPS (|)
BV (|)
ABV (|)
P/E
P/BV
P/ABV
Yields & Margins (%)
Net Interest Margins
Yield on assets
Avg. cost on funds
Yield on average advances
Avg. Cost of Deposits
Quality and Efficiency (%)
Cost to income ratio
Credit/Deposit ratio
GNPA
NNPA
ROE
ROA

FY14

FY15

FY16E

FY17E

52.6
26.8
3.5
171.8
168.3
35.2
5.5
5.6

52.9
33.9
3.5
200.8
196.8
27.8
4.7
4.8

59.0
39.5
5.9
299.3
295.7
23.9
3.2
3.2

59.0
49.5
7.4
340.2
335.6
19.0
2.8
2.8

3.9
11.3
7.7
13.3
7.6

3.8
10.8
7.4
12.5
7.7

3.8
10.7
7.4
12.4
7.5

3.8
10.5
7.4
12.1
7.4

45.7
91.1
1.1
0.3
16.9
1.8

46.8
92.8
0.8
0.3
18.2
1.8

45.2
94.8
0.9
0.2
16.5
1.9

44.5
98.5
0.9
0.3
15.5
2.0

FY15
25.4
24.8
22.5
19.2
18.3
24.7
19.3
27.4
17.7
26.5

FY16E
22.5
25.4
22.7
23.1
24.5
19.8
27.9
29.7
66.1
16.5

Source: Company, ICICIdirect.com Research

Balance sheet

| Crore

(Year-end March)
Sources of Funds
Capital
Reserves and Surplus
Networth
Deposits
Borrowings
Other Liabilities & Provisions
Total

FY14

FY15

FY16E

FY17E

525.6
8506.3
9031.9
60502.3
14762.0
2718.7
87,014.9

529.5
10101.0
10630.5
74134.4
20618.1
3719.0
109,101.9

589.8
17062.4
17652.2
90983.1
21432.1
3584.8
133,652.3

589.8
19473.8
20063.6
108462.1
23650.3
3776.3
155,952.2

Application of Funds
Fixed Assets
Investments
Advances
Other Assets
Cash with RBI & call money
Total

1016.4
21563.0
55101.8
2575.3
6769.4
87,025.9

1157.6
24859.4
68788.2
3531.6
10779.1
109,115.9

1269.5
28095.5
86237.0
6282.5
11767.8
133,652.3

1444.2
32311.4
106819.6
1912.3
13464.7
155,952.2

Growth ratios
(Year-end March)
Total assets
Advances
Deposit
Total Income
Net interest income
Operating expenses
Operating profit
Net profit
Net worth
EPS

(% growth)
FY14
18.7
24.3
11.8
21.5
29.5
24.4
41.1
32.7
18.5
32.0

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

FY17E
16.7
23.9
19.2
19.4
21.5
19.1
22.5
25.4
13.7
25.4

ICICIdirect.com coverage universe (Banking)

Sector / Company
Bank of India (BANIND)
Bank of Baroda (BANBAR)
Punjab National Bank (PUNBAN)
State Bank of India (STABAN)
Indian Bank (INDIBA)
Axis Bank (AXIBAN)
City Union Bank (CITUNI)
DCB Bank (DCB)
Federal Bank (FEDBAN)
HDFC Bank (HDFBAN)
IndusInd Bank (INDBA)
Jammu & Kashmir Bk(JAMKAS)
Kotak Mahindra Bank (KOTMAH)
South Indian Bank (SOUIN0)
Yes Bank (YESBAN)

CMP
(|)
TP(|)
144
125
176
190
137
129
244
300
138
174
489
630
91
114
138
152
65
71
1,086 1,204
943 1,050
91
98
664
660
23
23
723
850

Rating
Sell
Hold
Hold
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Hold
Hold
Hold
Buy

M Cap
EPS (|)
P/E (x)
(| Cr) FY15 FY16E FY17E FY15 FY16E FY17E
8,889
26
18
26
5.6
8.1
5.4
39,022
15
19
21 11.5
9.4
8.3
24,847
17
16
19
8.3
8.7
7.1
181,940
16
19
22 15.0 13.0 11.3
5,941
21
23
28
6.6
6.1
4.9
116,030
31
34
39 15.7 14.2 12.6
5,500
6
8
9 14.2 11.6 10.2
3,563
7
8
9 20.2 18.1 15.4
11,204
6
6
7 11.1 11.7
9.9
271,563
41
49
57 26.7 22.1 18.9
54,924
34
39
50 27.8 23.9 19.0
4,399
10
16
20
8.7
5.6
4.5
121,420
14
8
13 48.6 82.6 50.8
3,043
2
3
3
9.9
8.6
7.3
30,076
48
56
64 15.1 13.0 11.2

P/ABV (x)
RoA (%)
RoE (%)
FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E
0.8
0.9
0.8 0.3 0.2 0.3
6
4
6
1.3
1.2
1.1 0.5 0.6 0.6
9
10
10
1.2
1.1
1.0 0.5 0.5 0.5
8
8
9
1.8
1.6
1.4 0.6 0.7 0.7
10
11
11
0.6
0.6
0.6 0.5 0.5 0.6
7
7
9
2.7
2.3
2.0 1.7 1.6 1.6
18
17
16
2.2
1.9
1.6 1.4 1.6 1.6
16
16
16
2.7
2.4
2.1 1.3 1.2 1.2
15
13
14
1.5
1.4
1.3 1.3 1.1 1.1
14
12
13
4.4
3.8
3.3 1.9 1.9 2.0
19
18
18
4.8
3.2
2.8 1.8 1.9 2.0
18
16
15
0.9
0.9
0.8 0.7 1.0 1.1
9
12
14
5.8
5.5
5.2 1.5 0.8 1.1
12
6
10
1.0
0.9
0.9 0.5 0.6 0.6
9
10
11
2.6
2.2
1.9 1.6 1.6 1.5
21
18
18

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 10

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 11

ANALYST CERTIFICATION
We /I, Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.

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ICICI Securities Ltd | Retail Equity Research

Page 12