Result Update

January 13, 2016

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

IndusInd Bank (INDBA)

Hold
| 1000
12 months
7%

Treading well relative to peers.

Whats Changed?
Target
EPS FY16E
EPS FY17E
Rating

Changed from | 1050 to | 1000

Unchanged
Unchanged
Changed from Buy to Hold

Quarterly Performance
NII
Other income
PPP
PAT

Q3FY16
1,173.4
839.0
1,061.0
581.0

Q3FY15
861.4
610.8
773.8
447.2

YoY (%)
36.2
37.4
37.1
29.9

Q2FY16 QoQ (%)

1,094.3
7.2
783.5
7.1
1,006.5
5.4
560.0
3.7

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
4,292.0
3,965.2
2,310.7

FY17E
5,219.5
4,843.7
2,937.1

FY14
35.0
39.2
5.6
6.2
16.9
1.8

FY15
27.7
31.0
4.8
5.3
18.2
1.8

FY16E
24.0
26.8
3.2
3.6
16.3
1.9

FY17E
18.8
21.1
2.8
3.1
15.6
2.0

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

Stock data
Market Capitalisation
GNPA (Q3FY16)
NNPA (Q3FY16)
NIM (%) (Q3FY16)
52 week H/L
Equity Capital
Face Value
DII Holding (%)
FII Holding (%)

| 54496 Crore
| 682 Crore
| 273 Crore
2.91
989 /784
| 590 Crore
| 10
11.0
42.8

Price performance (%)

Return %
Yes Bank
Axis Bank
Indusind Bank

1M
-4.4
-9.8
0.3

3M
-4.6
-15.8
0.2

| 935

6M
-13.0
-28.3
6.1

12M
-9.8
-17.6
18.6

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

PAT growth sustained at 30% YoY to | 581 crore (in-line with our
estimates), led by better-than-expected NII & other income growth.
Strong business growth continued with credit increasing 28.7% YoY
to | 82167 crore as expected. Deposit grew higher than expected at
24.6% YoY to | 86423 crore. Healthy traction in CV financing
continued with 31% YoY growth to | 13204 crore.
Post several quarters it is observed that consumer finance (CF)
segments growth at 27% YoY to | 34249 crore has been closer to
corporate segment growth of 30% YoY to | 47918 crore. This
enabled NII to surge 36.7% YoY to | 1173 crore.
Asset quality saw pressure but was manageable with GNPA ratio
increasing by 5 bps to 0.82% QoQ. Slippages incrementally were
higher from both CF & corporate segment. GNPA increased | 80
crore QoQ to | 681 crore. The restructured book reduced from 0.63%
of advances to 0.58% as in Q3FY16. Sale to ARCs were | 53 crore.
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
28.7% and 24.6% to | 82167 crore and | 86423 crore, respectively, as on
Q3FY16. IIBs loan mix is 41.7% consumer finance (CF) (~80% of which is
high vehicle financing) and 58% corporate banking (CB) (working capital
in nature and well diversified across industries). We factor in 25% loan
CAGR over FY15-17E to | 107760 crore.
Margins improve sharply; marginal cost largely factored in
IIB maintained calculated NIM of over 3.7% in the past while Q3FY16 NIM
was at 3.91%. 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 receding & the book
is witnessing healthy growth. Going ahead, we expect GNPA ratio to rise
to 1% at | 1035 crore by FY17E.
Better visibility in earnings than peers provides comfort; Hold
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 | 2937 crore by FY17E.
Capital raising (~| 5100 crore) led to RoE decline of ~350 bps to 16%.
We have tweaked our estimates as we factor in slightly higher slippages
and credit costs. We value the bank at 3x FY17E ABV and revise our
target price to | 1000 (|1050 earlier). We revise rating from Buy to Hold.

Variance analysis
Q3FY16 Q3FY16E
NII

Q3FY15

YoY (%)

Q2FY16

QoQ (%)

1,173

1,116

861

36.2

1,094

7.2

3.91

3.70

3.67

24 bps

3.88

3 bps

NIM (%)

Other Income

839

808

611

37.4

784

7.1

2,012

1,924

1,472

36.7

1,878

7.2

327
625

311
588

256
443

27.8
41.1

301
571

8.6
9.5

1,061
177
884
303
581

1,025
160
866
287
579

774
98
676
229
447

37.1
80.7
30.8
32.5
29.9

1,007
158.1
848
288.4
560.0

5.4
12.0
4.2
5.0
3.7

GNPA
NNPA

681
273

632
225

673
202

1.2
35.6

602.1
240.8

13.1
13.5

Total Restructured assets

477

500

351

35.7

493.3

-3.4

Net Total Income

Staff cost
Other Operating Expenses
PPP
Provision
PBT
Tax Outgo
PAT

Comments
NII traction was higher-than-expected largely due to higher-than-expected traction in loans
and margins
Margins improved seqentially on the back benefit of capital raised (~| 5100 crore) in
Q2FY16, improvement in CASA ratio and increase in CV portfolio and two wheeler
portfolio which is high yielding
Higher-than-expected growth in other income was on account of higher core fee income,
which increased 39% YoY. This was mainly led by pocessing fees (up 103% YoY). Retail
fee share contributes 35% in the total loan processing fees.

The cost to income ratio increased to 47.3 % from 46.4%. This quarter, the bank added 51
branches vs.43 in Q2FY16. The bank re-iterated its target of 1200 branches by FY17.

Key Metrics
Slippages were higher both in corporate and consumer finance segment at | 113 crore
and | 139 crore, respectively.
Restructured loans as a percentage of total credit improved to 0.58% of loans from 0.63%
as on Q2FY16

Source: Company, ICICIdirect.com Research

Change in estimates
(| Crore)
Net Interest Income
Pre Provision Profit
NIM(%) (calculated)

Old
4,258
3,963
3.8

PAT
ABV per share (|)

2,328
295.7

FY16E
New % Change
4,292
0.8
3,965
0.0
3.8
2 bps
2,311
293.9

-0.7
-0.6

Old
5,173
4,854
3.8
2,920
335.6

FY17E
New % Change
5,219
0.9
4,844
-0.2
3.8
1 bps
2,937
334.7

0.6
-0.3

Comments
NII estimates increased as we increase our credit growth estimates

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
26.5
23.8
22.7
19.2
35.1
37.1
3.8
3.8
46.4
45.9
797.9
1,034.9
301.5
323.2
1.1
0.8
0.7
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 25% CAGR over FY15-17E to | 107760 crore

The CF book, amounting to | 34249 crore as on Q3FY16, 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 27.9% CAGR in the CF
book over FY15-17E to | 46495 crore.

Exhibit 1: CV portfolio witnessing healthy traction; absolute book increases by | 844 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 Q2FY15
9,614
9,685
2,050
2,013
1,932
1,889
2,512
2,688
2,642
2,906
2,854
2,795
457
536
2,473
3,023
251
430
24,785 25,964
11
7

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

Q4FY15
10,618
2,017
1,843
2,808
3,146
2,816
698
3,705
761
28,412
15

Q1FY16 Q2FY16 Q3FY16

11,405 12,360 13,204
2,043
2,037
2,041
1,860
1,938
2,019
2,829
2,857
3,034
3,293
3,539
3,754
2,827
2,861
3,036
786
885
1,008
4,032
4,331
4,759
932
1,147
1,393
30,007 31,956 34,249
18
23
27

Source: Company, ICICIdirect.com Research

IIBs CB book at | 47918 crore as on Q3FY16 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 23% over FY15-17E to | 61266 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.
Even during Q3FY16, corporate book grew at 30% YoY to | 47918 crore
led by mid corporate segment.
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

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

Q3FY16
22,022
16,042
9,854
47,918
30.1

Source: Company, ICICIdirect.com Research

We expect the loan book traction to stay ahead of industry at 25% CAGR
over FY15-17E.

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

Q2FY15
59931
22.4

Q3FY15
63847
21.7

Q4FY15
68788
24.8

Q1FY16
72243
23.1

Q2FY16
78294.5
30.6

Q3FY16
82167
28.7

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 continues to improve 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

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

Q4FY15
12,944
12,356
48,835
74,134
22.5
25,300
34.1

Q1FY16 Q2FY16
14,016 15,046
12,929 13,039
50,748 52,755
77,693 80,840
21.6
22.5
26,945 28,085
34.7
34.7

Q3FY16
16,125
14,107
56,191
86,423
24.6
30,232
35.0

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 ~15% while in the corporate
space yields are at ~10-11%. 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 and changing loan mix
14

We have factored in calculated NIMs of 3.8% for FY16E

10.83

12

11.46

10.35

11.66

11.26

10.80

9.88

9.67

10.73

10.55

(%)

10
8.23

8.21

1.73

2.06

FY08

FY09

7.73

7.40

6.19

4
2

8.29

8.04
6.44

7.44

7.37

3.17

3.79

3.65

3.73

3.94

3.81

3.92

3.89

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).
During Q3FY16, total slippages were higher at | 252 crore (slippage ratio
at 1.47% vs. 1.1% in Q2FY16). This was led by | 139 crore slippages in
the CF segment. The | 113 crore slippages in corporate book, though was
lower compared to CF segment, but was incrementally higher compared
to | 73 crore seen in Q2FY16.
We expect absolute GNPA and NNPA of | 1035 crore and | 323 crore,
respectively, as on FY17E. Despite this, IIBs asset quality remains
manageable and appears better than the system.
Exhibit 6: Asset quality remains acceptable
1,200

Credit cost is also expected to be in the guided range of

1,000

60-70 bps over FY15-17E. We expect GNPA and NNPA

ratios of 1% and 0.3%, respectively, by FY17E

1.0

(%)

(| Crore)

800
600
400
200
-

1.0

0.5

458
0.3
266

347
0.3

0.3

0.3

102

73

95

137

184

FY10

FY11

FY12

FY13

FY14

GNPA

NNPA

1.2

1.1

1.0
621

255

1.4

1,035

1.2

563 0.8570 0.8602

0.3
210

0.3
225

0.8681

0.3
241

798
0.8

0.3
273

1.0 1.0

0.9

0.8
0.6

0.3

0.3

302

323

0.4
0.2
0.0

FY15 Q1FY16Q2FY16Q3FY16 FY16E FY17E

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 25% to | 3733
crore over FY15-17E.
Exhibit 7: Core fee income trend continues to be strong at 39% YoY
Other income break up (| Crore)
Core fee income
Securities/FX tradingothers

FY11 FY12 FY13 FY14 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16

629 913 1,239 1,610
522
569
599
673
726
85
92
107
263
88
90
125
110
113

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 Q4FY15 Q1FY16 Q2FY16 Q3FY16

88 118
169
214
62
80
56
84
85
111 201
285
435
169
110
159
170
170
161 245
270
281
98
127
107
119
126
88 110
139
145
42
45
49
41
46
124 161
233
291
91
111
104
145
185
58
79
143
242
59
96
123
114
113
629 913 1,239 1,610
522
569
599
673
726

Source: Company quarterly presentation, ICICIdirect.com Research

Exhibit 8: Expanding branch and ATM network

Branches

ATM

Source: Company quarterly presentation, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

Q3FY16

Q2FY16

Q1FY16

Q4FY15

Q3FY15

Q2FY15

Q1FY15

FY14

FY13

FY12

FY11

FY08

the bank plans to double its branch network to ~1200

FY10

has 905 branches. Under Planning Cycle III, over FY14-17,

FY09

The bank added 51 new branches in this quarter and now

1800
1578 1621
1487 1543
1600
1238 1277 1277
1400
1110
1200
905
882
1000
811 854
727 801
692
685
800
602 638
594
500
497
600
400
336 356
400 180 180 210 300
200
0

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.
PAT CAGR is seen at 28% to | 2945 crore by FY17E. We have tweaked
our estimates as we factor in slightly higher slippages and credit costs.
We value the bank at 3x FY17E ABV and revise our target price to | 1000
(|1050 earlier). We revise our rating from Buy to Hold.
Exhibit 9: Valuation

FY14
FY15
FY16E
FY17E

NII
(| cr)
2,891
3,420
4,292
5,219

Growth
(%)
39.5
41.3
42.0
41.7

PAT
(| cr)
1,408.5
1,794.1
2,310.7
2,937.1

Growth
(%)
32.7
27.4
28.8
27.1

P/E
(x)
35.0
27.7
24.0
18.8

ABV
(|)
168.3
196.8
293.9
334.7

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
16.3
15.6

Company snapshot
1,200

Target price: | 1000

1,000
800
600
400
200

Jan-17

Jul-16

Oct-16

Apr-16

Oct-15

Jan-16

Jul-15

Apr-15

Jan-15

Jul-14

Oct-14

Apr-14

Jan-14

Jul-13

Oct-13

Apr-13

Jan-13

Jul-12

Oct-12

Apr-12

Jan-12

Jul-11

Oct-11

Apr-11

Jan-11

Jul-10

Oct-10

Apr-10

Jan-10

Jul-09

Oct-09

Apr-09

Jan-09

Jul-08

Oct-08

Apr-08

Jan-08

Jul-07

Oct-07

Apr-07

Jan-07

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
FY11
FY11
Dec-11
FY13
Apr-13
May-13
Jul-13
Sep-13
Jun-15

IndusInd Bank enters into an agreement with Deutsche Bank to acquire its credit card business in India
IndusInd Bank signs an MoU with HDFC Ltd for home loans
Planning Cycle I (FY08-FY11) successfully achieved; launches Planning Cycle II (FY11-14)
Savings rate deregulation in Q3FY12 wherein IIB offers higher rates (6% above | 1 lakh and 5.5% up to | 1 lakh)
Branch network touches 500 and launches Planning Cycle III (FY14-FY16)
On April 1, 2013, the bank included in the Nifty 50 benchmark index
IndusInd was the best performing stock in the banking industry as it rose from | 45 in FY09 to all-time high of | 523.
RBI tightens liquidity by raising MSF rate by 3% and various other measures. IndusInd impacted due to its high reliance on wholesale deposits (50%)
Arrival of new RBI Governor changes sentiment, eases a few of the tight liquidity measures due to which the stock of IndusInd bounces back
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.
The Vanguard Group, Inc.
Birla Sun Life Asset Management Company Ltd.
ICICI Prudential Life Insurance Company Ltd.

Shareholding Pattern
Latest Filing
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Nov-2015
30-Sep-2015
30-Sep-2015

% OS Position (m) Change (m)

17.8%
105.90M +10.07M
3.75%
22.26M
0
2.88%
17.13M
-0.05M
2.49%
14.76M
0
2.02%
11.98M
-0.80M
1.66%
9.86M
+0.27M
1.53%
9.07M
0
1.36%
8.07M
+0.07M
1.34%
7.98M
+1.87M
1.33%
7.91M
-0.11M

(in %)
Promoter
FII
DII
Others

Sep-14 Dec-14 Dec-14

15.13 15.12 15.12
43.20 40.59 40.59
8.63
8.97
8.97
33.04 35.32 35.32

Jun-15 Sep-15
15.04 14.98
38.58 42.78
9.41 11.02
36.97 31.22

Source: Reuters, ICICIdirect.com Research

Recent Activity
Investor name
Buys
Hinduja Group
William Blair Investment Management, LLC
20th Century Holdings Pvt. Ltd.
Birla Sun Life Asset Management Company Ltd.
HDFC Standard Life Insurance Company Limited

Investor name
Value
+144.9M
+54.65M
+28.96M
+26.93M
+21.59M

Shares
+10.07M
+3.80M
+1.89M
+1.87M
+1.50M

Sells
William Blair & Company, L.L.C.
Life Insurance Corporation of India
General Atlantic LLC
Neuflize OBC Investissements
Chander (Suhail)

Value
-55.42M
-30.92M
-11.51M
-3.36M
-3.52M

Shares
-3.85M
-2.15M
-0.80M
-0.24M
-0.23M

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
11,884.6
7592.6
4,292.0
25.5
3112.3
1989.7
156.6
966.0

FY17E
14,273.8
9054.4
5,219.5
21.6
3732.5
2467.3
198.9
1066.3

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

7404.3
1283.1
2156.0
3965.2
567.1
3398.1
1087.4
2,310.7
28.8
39.2

8951.9
1399.8
2708.5
4843.7
524.5
4319.2
1382.1
2,937.1
27.1
49.8

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
35.0
5.5
5.6

52.9
33.9
3.5
200.8
196.8
27.7
4.7
4.8

59.0
39.2
5.9
299.1
293.9
24.0
3.1
3.2

59.0
49.8
7.4
340.2
334.7
18.8
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
12.3
7.5

3.8
10.5
7.5
12.0
7.5

45.7
91.1
1.1
0.3
16.9
1.8

46.8
92.8
0.8
0.3
18.2
1.8

46.4
95.7
0.9
0.3
16.3
1.9

45.9
99.4
1.0
0.3
15.6
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
26.5
22.7
24.0
25.5
26.2
28.0
28.8
65.9
15.6

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
17048.5
17638.3
90983.1
21432.1
3584.8
133,638.4

589.8
19474.1
20063.9
108462.1
23650.3
3776.3
155,952.5

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
87032.3
5473.3
11767.8
133,638.4

1444.2
32311.4
107760.3
971.9
13464.7
155,952.5

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
23.8
19.2
20.1
21.6
19.5
22.2
27.1
13.8
27.1

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
(|)
101
130
97
196
99
396
85
78
49
1,045
936
76
687
19
664

TP(|)
116
172
130
300
184
600
105
85
60
1,220
1,000
95
677
23
850

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

M Cap
EPS (|)
P/E (x)
(| Cr) FY15 FY16E FY17E FY15 FY16E FY17E
7,996
26
-3
16
3.9
NA
6.1
29,958
15
16
20
8.5
8.3
6.6
17,542
17
18
25
5.9
5.5
3.9
146,403
18
19
22 11.2 10.5
9.1
4,248
21
23
29
4.7
4.3
3.4
93,957
31
35
42 12.7 11.4
9.5
5,085
6
7
8 13.2 12.0 10.4
2,015
7
6
4 11.4 13.7 18.8
8,392
6
5
5
8.3 10.3
9.0
261,363
41
49
61 25.7 21.3 17.1
54,496
34
39
50 27.6 23.7 18.9
3,660
10
17
21
7.2
4.4
3.7
125,756
14
11
13 50.4 64.6 53.6
2,570
2
3
3
8.3
7.1
6.1
27,848
48
57
67 13.8 11.6 10.0

P/ABV (x)
RoA (%)
RoE (%)
FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E
0.4
0.8
0.6 0.3 0.0 0.2
6
-1
4
0.9
1.0
0.9 0.5 0.5 0.5
9
9
10
0.8
0.7
0.7 0.5 0.5 0.7
8
8
11
1.5
1.2
1.1 0.7 0.7 0.7
11
10
11
0.4
0.4
0.4 0.5 0.5 0.6
7
7
9
2.2
1.8
1.6 1.7 1.7 1.7
18
17
17
2.1
1.8
1.6 1.4 1.4 1.5
16
15
15
1.5
1.4
1.3 1.3 0.9 0.6
15
10
7
1.1
1.1
1.0 1.3 0.9 0.9
14
10
11
4.3
3.7
3.1 1.9 1.9 1.9
19
18
19
4.8
3.2
2.8 1.8 1.9 2.0
18
16
15
0.8
0.7
0.6 0.7 1.0 1.1
9
13
14
6.0
5.7
5.2 1.5 1.0 1.0
12
9
9
0.8
0.8
0.7 0.5 0.6 0.6
9
10
11
2.4
2.1
1.8 1.6 1.6 1.6
21
19
19

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.

Terms & conditions and other disclosures:

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engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and has its various
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Page 12