Result Update

April 22, 2016

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

IndusInd Bank (INDBA)

Hold
| 1060
12 months
8%

Healthy quarter; growth momentum to sustain

Whats Changed?
Target
EPS FY17E
EPS FY18E
Rating

Changed from | 1000 to | 1060

Changed from | 49.8 to | 49.5
Introduced at | 61
Unchanged

Quarterly Performance
NII
Other income
PPP
PAT

Q4FY16
1,268.2
912.8
1,151.2
620.4

Q4FY15
925.1
699.1
850.5
495.3

YoY (%)
37.1
30.6
35.4
25.3

Q3FY16 QoQ (%)

1,173.4
8.1
839.0
8.8
1,061.0
8.5
581.0
6.8

Key Financials
| Crore
NII
PPP
PAT

FY15
3,420.3
3,098.2
1,794.1

FY16E
4,517.6
4,178.8
2,285.4

FY17E
5,677.7
5,186.2
2,945.2

FY18E
6,894.9
6,311.9
3,638.2

FY15
29.0
31.3
5.0
5.4
18.2
1.8

FY16E
25.6
27.6
3.3
3.6
15.9
1.9

FY17E
19.9
21.4
2.9
3.1
15.3
2.0

FY18E
16.1
17.3
2.6
2.8
16.5
2.0

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

Stock data
Market Capitalisation
GNPA (Q4FY16)
NNPA (Q4FY16)
NIM (%) (Q4FY16)
52 week H/L
Net worth
Face Value
DII Holding (%)
FII Holding (%)

| 58370 Crore
| 777 Crore
| 322 Crore
3.94
1083 /886
| Crore
| 10
11.4
43.3

Price performance (%)

Return %
Yes Bank
Axis Bank
Indusind Bank

1M
9.7
2.1
6.4

3M
36.2
19.3
9.9

| 994

6M
15.6
-11.8
2.7

12M
10.4
-16.6
12.8

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 was in line at 25% YoY to | 620 crore led by better-thanexpected NII (up 37% YoY) and other income growth
Above industry business growth continued with loans increasing
28.5% YoY to | 88419 crore. Deposit grew higher-than-expected at
25.4% YoY to | 93000 crore. Traction in CV financing improved
further with 33% YoY growth to | 14101 crore
Consumer finance (CF) book growth at 29% YoY to | 34549 crore has
been above corporate segment growth of 28% YoY to | 51870 crore.
There was a sell down of | 2200 crore in the corporate book. The CF
book may accelerate faster than corporate book, going ahead
The asset quality saw pressure but was manageable with GNPA ratio
increasing 5 bps to 0.87% QoQ. Slippages were incrementally higher
in the CF book but flat QoQ in the corporate book. The restructured
book reduced from 0.58% of advances to 0.53% on Q4FY16. Sale to
ARCs was | 40 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 1.9% as
on FY16) despite the turbulent economic scenario. The loans, deposits
and PAT traction improved to 27%, 22% and 53% CAGR in FY08-16 from
12%, 13% and -35% in FY05-08, respectively. The loan and deposit grew
28.5% and 25.4% to | 88419 crore and | 93000 crore, respectively, as on
Q4FY16. IIBs loan mix is 41.3% consumer finance (CF) (~80% of which is
high vehicle financing) and 58.7% corporate banking (CB) (working capital
in nature and well diversified across industries). We factor in 24.7% loan
CAGR over FY16-18E to | 137602 crore.
NIMs improve sharply; believe healthy levels to stay on rising CF book
IIB maintained calculated NIM of over 3.7% in the past while Q4FY16 NIM
was at 3.94%. In the past six years, reported NIM improved from 1.7% to
3.8% as on FY16. 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
MCLR is seen minimal with 72% of book being fixed. Expect calculated
NIM to stay healthy at ~4% levels by FY18E on rising CF proportion.
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 0.87%
now. Diversification led to a steady performance on the asset quality
front. Concerns surrounding the CV portfolio (16% of loans) are receding
and the book is witnessing healthy growth. Going ahead, we expect the
GNPA ratio to rise to 1% at | 1049 crore by FY17E.
Better visibility in earnings than peers provides comfort; maintain 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 26% to | 3638 crore by FY18E.
Capital raising (~| 5100 crore) led RoE to decline ~350 bps to 16%. We
revise our target price higher to | 1060 from | 1000 earlier as we roll over
to FY18E ABV of | 383 assigning the multiple of 2.8x. We advise investors
to continue to HOLD the stock.

Variance analysis
Q4FY16 Q4FY16E
NII

Q4FY15

YoY (%)

Q3FY16

QoQ (%)

Comments
NII traction was higher-than-expected largely due to higher-than-expected traction in
loans and margins
Margins improved seqentially on the back of benefit of improvement in CASA ratio and
increase in consumer finance portfolio, which is high yielding

1,268

1,193

925

37.1

1,173

8.1

3.94
913

3.80
843

3.68
699

26 bps
30.6

3.91
839

3 bps
8.8

Net Total Income

Staff cost
Other Operating Expenses

2,181
336
693

2,036
330
631

1,624
265
508

34.3
26.8
36.4

2,012
327
625

8.4
3.0
11.0

PPP
Provision
PBT
Tax Outgo
PAT

1,151
214
938
317
620

1,075
182
893
286
607

851
107
743
248
495

35.4
98.9
26.2
28.0
25.3

1,061
177.1
884
302.9
581.0

8.5
20.7 Provisions came in higher owing to higher slippages
6.1
4.7
6.8

NIM (%)
Other Income

Key Metrics

GNPA
NNPA

777
322

1,022
328

563
210

38.0
52.9

681.0
273.3

Slippages were higher in consumer finance segment at | 168 crore while it was flat QoQ
in corporate book at | 106 crore. Sale to ARCs in Q4FY16 was | 40 crore and their
14.1 receipts from earlier sale of | 30 crore. Total sale to ARCs in FY16 was at | 270 crore
17.7 PCR was maintained at 59%

Total Restructured assets

469

325

365

28.5

476.6

Restructured loans as a percentage of total credit improved further to 0.53% of loans

-1.7 from 0.58% as on Q3FY16

Source: Company, ICICIdirect.com Research

Change in estimates
FY17E
New % Change
5,678
8.8
5,186
7.1

Old
5,219
4,844

NIM(%) (calculated)

3.9

4.0

14 bps

4.0

2,937
334.7

2,945
337.6

0.3
0.9

3,638
383.0

PAT
ABV per share (|)

Old

FY18E
New % Change
6,895
6,312

(| Crore)
Net Interest Income
Pre Provision Profit

Comments
NII estimates increased as we increase our margin estimates
Margin to rise as CF book, which is ~350 bps higher yielding than corporate book is
expected to increase in proportion
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 (%)

FY15
24.8
22.5
34.1
3.8
46.8
562.9
210.5
1.6
0.6

FY16
28.5
25.5
35.2
4.0
46.5
775.1
321.0
1.2
0.8

Current
FY17E
FY18E
23.9
25.6
22.9
23.5
36.4
37.1
4.0
4.0
46.0
45.3
1,049.0
1,448.1
404.0
707.6
0.8
0.8
0.6
0.5

Earlier
FY17E
23.8
19.2
37.1
3.8
45.9
1,034.9
323.2
0.8
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 FY16 was at | 88419 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 41.3% and 58.7%, respectively, as on
FY16. Excluding ~| 5300 crore acquired diamond portfolio, the CF
proportion is 44%. The bank has guided at maintaining 1:1 distribution of
the total loan between CF and CB book, going ahead. Thus, CF book
could witness higher traction led by CV financing.
We expect advances growth to stay well above the
system at 24.7% CAGR over FY16-18E to | 137602 crore

The CF book, amounting to | 36459 crore as on Q4FY16, 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 30% CAGR in the CF
book over FY16-18E to | 62094 crore.
Exhibit 1: CV portfolio witnessing healthy traction
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 Q3FY15
9,614 10,043
2,050
2,013
1,932
1,867
2,512
2,838
2,642
2,988
2,854
2,797
457
598
2,473
3,313
251
554
24,785 27,011
11
10

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

Q1FY16
11,405
2,043
1,860
2,829
3,293
2,827
786
4,032
932
30,007
18

Q2FY16 Q3FY16 Q4FY16

12,360 13,204 14,101
2,037
2,041
2,058
1,938
2,019
2,045
2,857
3,034
3,045
3,539
3,754
3,917
2,861
3,036
3,244
885
1,008
1,204
4,331
4,759
5,248
1,147
1,393
1,687
31,956 34,249 36,549
23
27
29

Source: Company, ICICIdirect.com Research

IIBs CB book at | 51870 crore as on Q4FY16 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 21% over FY16-18E to | 75508 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.
During Q4FY16, the corporate book grew 28.5% YoY to | 51870 crore led
by mid corporate segment. Including loan sold of | 2200 crore the
traction was higher at ~33% YoY.
Exhibit 2: Break up of corporate book
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

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

Q4FY16
25,258
16,624
9,988
51,870
28.5

Source: Company, ICICIdirect.com Research

We expect the loan book traction to stay ahead of industry at 24.7%

CAGR over FY16-18E.

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

Q3FY15
63847
21.7

Q4FY15
68788
24.8

Q1FY16
72243
23.1

Q2FY16
78294.5
30.6

Q3FY16
82167
28.7

Q4FY16
88419
28.5

Source: Company, ICICIdirect.com Research

We expect CASA CAGR of 27% over FY16-18E at | 52403

crore and expect CASA ratio at 37.1%

Impressive improvement in liability franchise

IIBs deposits have also witnessed a sharp traction of 22% CAGR in FY0816 to | 93000 crore. More notable is the improvement in quality of the
liability franchise. The CASA ratio in the period has doubled to 35.2% of
deposits currently owing to a rising branch presence (up from 210 in FY10
to over 1000 as on FY16), innovative services & SA deregulation in
Q2FY12.
Going ahead, we expect the deposit base to increase at 23% CAGR in
FY15-17E to | 141163 crore considering the system wide slowdown in
deposits. We have built in a CASA CAGR of 27% in FY16-18E to | 52403
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

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

Q1FY16
14,016
12,929
50,748
77,693
21.6
26,945
34.7

Q2FY16 Q3FY16
15,046 16,125
13,039 14,107
52,755 56,191
80,840 86,423
22.5
24.6
28,085 30,232
34.7
35.0

Q4FY16
17,246
15,478
60,276
93,000
25.4
32,724
35.2

Source: Company quarterly presentation, ICICIdirect.com Research

Margins to stay among best in class

IIBs FY16 calculated NIM of 3.97% is highest after HDFC Bank and Kotak
Mahindra Bank. We expect calculated NIMs to improve further over FY16
-18E owing to enhanced growth in CF book led by CV financing and
further improvement in CASA franchise. The high yielding nature of the
loan book as well as healthy CASA franchise has 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%. 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. In a falling interest rate scenario having ~70% of the loan
book on fixed rate augurs well for IndusInd Banks margins.

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 ~4% for FY17E

12

11.66

11.46

10.35

11.26

10.80

9.88

9.67

10.18

9.94

9.81

(%)

10
8.21

8
6
4
2

3.17

2.06

FY09

8.29

8.04
6.44

FY10

7.73

7.40

6.19

6.74

6.54

6.47

3.79

3.65

3.73

3.94

3.81

3.97

4.04

4.02

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

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 remain 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 | 777 crore and | 322 crore, respectively, as on FY16.
Restructured assets (RA) at | 469 crore as on FY16 account for only 0.5%
of the total loan book, which is one of the lowest in the industry.
During Q4FY16, total slippages were higher at | 274 crore (slippage ratio
at 1.6% vs. 1.47% in Q3FY16). This was led by | 168 crore slippages in
the CF segment. The | 106 crore slippages in corporate book, was lower
compared QoQ.
We expect absolute GNPA and NNPA of | 1049 crore and | 404 crore,
respectively, as on FY17E. Despite this, IIBs asset quality remains
manageable and appears better than the system.
Exhibit 6: Asset quality remains acceptable
1,600

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

1,400

60-70 bps over FY16-18E. We expect GNPA and NNPA

ratios of 1% and 0.4%, respectively, by FY17E

1.0

0.8
0.8

1,000
800

(%)

(| Crore)

1.0

1.0

1,200

600
400
200
-

458
0.3

621
0.3

0.3
266

0.3
347

73

95

137

184

FY11

FY12

FY13

FY14

GNPA

NNPA

1.2

1,448

1.1

563
0.3

210

0.8

570
0.3

225

0.8

602
0.3

681

241

1,049
0.9

1.0

775

0.3

0.4

273

321

1.1

0.8
0.5

0.4

1.0

708

0.6
0.4
0.2

404

0.0

FY15 Q1FY16Q2FY16Q3FY16 FY16 FY17E FY18E

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 | 2772 crore as on
FY16. The management expects fee income to increase at a higher pace
than loan growth. We have factored in total other income CAGR of 19% to
| 4646 crore over FY16-18E.
Exhibit 7: Core fee income trend continues to be strong at 27% YoY
Other income break up (| Crore)
Core fee income
Securities/FX tradingothers

FY11 FY12 FY13 FY14 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16

629 913 1,239 1,610
609
599
673
726
774
85
92
107
263
90
125
110
113
139

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 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16

88 118
169
214
80
56
84
85
97
111 201
285
435
110
159
170
170
140
161 245
270
281
127
107
119
126
138
88 110
139
145
45
49
41
46
48
124 161
233
291
151
104
145
185
228
58
79
143
242
96
123
114
113
122
629 913 1,239 1,610
609
599
673
726
774

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

Q4FY16

Q3FY16

Q2FY16

Q1FY16

Q4FY15

Q3FY15

Q2FY15

Q1FY15

FY14

FY13

FY12

FY09

network to ~1200

FY11

Cycle III, over FY14-17, the bank plans to double its branch

FY10

The bank added 199 new branches in FY16. Under Planning

2000
1800
1800
1543 1578 1621
1487
1600
1238 1277 1277
1400
1110
1200
1000
905
882
1000
801 811 854
727
692
800
602 638 685
594
500
497
600
400
356
300
400 180 210
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
the continuous re-rating in its 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%, while the RoE is
expected to decline ~350 bps to 16%. PAT CAGR is seen at 26% to
| 3638 crore by FY18E. We revise our target price higher to | 1060 from
| 1000 earlier as we roll over to FY18E ABV of | 383 assigning the
multiple of 2.8x. We advise investors to continue to HOLD the stock.
Exhibit 9: Valuation

FY15
FY16
FY17E
FY18E

NII
(| cr)
3,420
4,518
5,678
6,895

Growth
(%)
41.3
42.2
40.9
40.3

PAT
(| cr)
1,794.1
2,285.4
2,945.2
3,638.2

Growth
(%)
27.4
27.4
28.9
23.5

P/E
(x)
29.0
25.6
19.9
16.1

ABV
(|)
196.8
298.1
337.6
383.0

P/ABV
(x)
5.0
3.3
2.9
2.6

RoA
(%)
1.8
1.9
2.0
2.0

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 7

RoE
(%)
18.2
15.9
15.3
16.5

Company snapshot
1,200

Target price: | 1060

1,000
800
600
400
200

Apr-17

Nov-16

Jun-16

Jan-16

Aug-15

Mar-15

Oct-14

May-14

Dec-13

Jul-13

Feb-13

Sep-12

Apr-12

Nov-11

Jun-11

Jan-11

Aug-10

Mar-10

Oct-09

May-09

Dec-08

Jul-08

Feb-08

Sep-07

Apr-07

Nov-06

Jun-06

Jan-06

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

Shareholding Pattern
Latest Filing
% OS Position (m) Change (m)
31-Dec-2015 17.81%
105.94M
+0.04M
31-Dec-2015 3.74%
22.26M
0
31-Dec-2015 2.48%
14.76M
0
31-Dec-2015 2.01%
11.94M
-0.03M
31-Dec-2015 1.56%
9.30M
-0.55M
31-Oct-2015 1.52%
9.07M
0
31-Dec-2015 1.47%
8.72M
-8.40M
31-Mar-2016 1.43%
8.52M
+0.24M
31-Dec-2015 1.38%
8.23M
+0.31M
29-Feb-2016 1.35%
8.03M
-0.10M

(in %)
Promoter
FII
DII
Others

Dec-14
15.12
40.59
8.97
35.32

Jun-15 Sep-15 Dec-15 Mar-16

15.04 14.98 14.94 14.90
38.58 35.67 29.71 43.30
9.41 11.02 11.22 11.40
36.97 38.33 44.13 30.40

Source: Reuters, ICICIdirect.com Research

Recent Activity
Investor name
Buys
Norges Bank Investment Management (NBIM)
Mellon Capital Management Corporation
TIAA Global Asset Management
Reliance Capital Asset Management Ltd.
ICICI Prudential Life Insurance Company Ltd.

Value
+52.91M
+9.96M
+9.31M
+6.10M
+4.59M

Shares
+3.61M
+0.68M
+0.64M
+0.50M
+0.31M

Investor name
Sells
Franklin Templeton Asset Management (India) Pvt. Ltd.
William Blair & Company, L.L.C.
William Blair Investment Management, LLC
HDFC Standard Life Insurance Company Limited
HDFC Asset Management Co., Ltd.

Value
-123.00M
-55.42M
-55.60M
-12.27M
-12.16M

Shares
-8.40M
-3.85M
-3.80M
-0.84M
-0.83M

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

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

FY16E
11,580.5
7062.9
4,517.6
32.1
3295.8
2013.0
158.9
1123.9

FY17E
13,978.8
8301.0
5,677.7
25.7
3928.2
2496.1
190.7
1241.4

FY18E
16,827.1
9932.2
6,894.9
21.4
4645.6
3070.2
228.9
1346.6

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

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

7813.4
1235.7
2398.9
4178.8
673.5
3505.2
1219.8
2,285.4
27.4
38.4

9606.0
1409.5
3010.3
5186.2
689.8
4496.4
1551.3
2,945.2
28.9
49.5

11540.5
1564.2
3664.5
6311.9
731.8
5580.1
1941.9
3,638.2
23.5
61.1

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

FY15

FY16E

FY17E

FY18E

52.9
33.9
3.5
200.8
196.8
29.0
4.9
5.0

59.5
38.4
5.7
303.5
298.1
25.6
3.2
3.3

59.5
49.5
7.4
344.3
337.6
19.9
2.9
2.9

59.5
61.1
9.1
394.8
383.0
16.1
2.5
2.6

3.81
10.8
7.4
12.5
7.7

3.97
10.2
6.7
11.8
7.0

4.04
9.9
6.5
11.5
6.7

4.02
9.8
6.5
11.3
6.6

46.8
92.8
0.8
0.3
18.2
1.8

46.5
95.1
0.9
0.4
15.9
1.9

46.0
95.9
1.0
0.4
15.3
2.0

45.3
97.5
1.1
0.5
16.5
2.0

FY16E
26.2
28.5
25.5
23.0
32.1
33.3
34.9
27.4
69.9
13.4

FY17E
19.1
23.9
22.9
20.4
25.7
21.6
24.1
28.9
13.5
28.9

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

FY15

FY16E

FY17E

FY18E

529.5
10101.0
10630.5
74134.4
20618.1
3719.0
109,101.9

595.0
17461.0
18056.0
93001.7
23069.6
3584.8
137,712.1

595.0
19893.2
20488.2
114323.7
25416.7
3776.3
164,004.8

595.0
22897.9
23492.9
141162.6
28039.2
3983.9
196,678.6

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

1157.6
24859.4
68788.2
3531.6
10779.1
109,115.9

1269.5
31214.5
88419.0
5041.4
11767.8
137,712.1

1444.2
35898.1
109581.7
3616.2
13464.7
164,004.8

1654.0
41284.5
137602.3
1098.1
15039.8
196,678.6

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

(% growth)
FY15
25.4
24.8
22.5
19.2
18.3
24.7
19.3
27.4
17.7
26.5

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

FY18E
19.9
25.6
23.5
19.9
21.4
18.3
21.7
23.5
14.7
23.5

ICICIdirect.com coverage universe (Banking)

Sector / Company
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)
Yes Bank (YESBAN)

CMP
(|)
153
84
187
97
459
94
97
44
1,098
984
59
687
882

TP(|)
123
74
160
91
440
90
85
45
1,170
1,060
70
677
750

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

EPS (|)
P/E (x)
M Cap
(| Cr) FY15 FY16E FY17E FY15 FY16E FY17E
35,245
15
-8
11 10.0 -18.9 13.4
16,553
17
6
14
5.1 14.0
6.1
139,833
18
14
18 10.7 13.5 10.5
4,165
21
15
19
4.6
6.6
5.1
109,024
31
35
39 14.8 13.1 11.8
5,608
6
8
8 14.6 12.4 11.7
2,522
7
7
7 14.3 14.2 13.9
7,550
6
4
5
7.5 11.5
9.4
274,463
41
49
60 26.9 22.3 18.2
58,540
34
38
49 29.0 25.6 19.9
2,872
10
12
17
5.6
4.8
3.5
125,710
14
11
13 50.4 60.3 52.9
36,968
48
60
69 18.4 14.7 12.7

P/ABV (x)
RoA (%)
RoE (%)
FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E
1.1
2.4
2.1 0.5 -0.3 0.3
9
-5
7
0.7
1.2
0.9 0.5 0.2 0.4
8
3
6
1.4
1.4
1.4 0.7 0.5 0.6
11
8
9
0.4
0.5
0.5 0.5 0.4 0.4
7
5
6
2.5
2.2
1.9 1.7 1.7 1.6
18
17
16
2.3
2.0
1.8 1.4 1.5 1.5
16
16
15
1.9
1.7
1.5 1.3 1.1 1.0
15
12
11
1.0
1.0
1.0 1.3 0.7 0.8
14
8
9
4.5
3.8
3.3 1.9 1.9 1.9
19
18
19
5.0
3.3
2.9 1.8 1.9 2.0
18
16
15
0.6
0.6
0.5 0.7 0.8 1.0
9
10
12
6.0
5.5
5.0 1.5 1.1 1.1
12
9
9
3.2
2.7
2.3 1.6 1.7 1.6
21
20
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.

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ICICI Securities Ltd | Retail Equity Research

Page 12