Intelligent Investor

Intelligent Investor

Recommendation Indusind Bank :
Accumulate At Every Decline

The private bank promoted by Hinduja group started operations along with HDFC Bank / ICICI Bank / UTI bank ( name converted as Axis Bank ) . The bank lagged behind for the initial 15 years . The performance took a dramatic turn when NBFC – Ashok Leyland Finance got merged with this bank with a clear growth path in retail & corporate loan programmes. .

The performance of the bank took a healthy growth after a new management led by experienced management professionals of ABN Amro Bank . The first phase of restructuring which involved improving profitability productivity and efficiency of the bank came to an end in March 2011 with all parameters surpassing the bank`s internal targets .

Among these are its strong positioning in the niche commercial vehicle (CV) financing business , low nonperforming asset ratio , healthy profitability ratios , strong fee – income flows , aggressive expansion of branch network to attract retail customers and foray into new lending segments . The return on asset of the bank for the year ended March 2011 was a healthy 1.26 percent . The NIM was also strong at 3.98 per cent . Even in the recent tough March quarter , the bank maintained NIM at 4.03 per cent , demonstrating its ability to sustain high margin .


IndusInd Bank`s loan mix is well divided between retail and corporate , with high yielding retail banking constituting 44 per cent of the loans . Given the expertise and synergies gained from the merger of Ashok Leyland finance with itself , the majority of the retail loan book of Indus Ind Bank flows from the auto sector .

However , the bank is increasingly shifting its focus towards other retail avenue such as mortgage loans ( currently only one percent of the book ) credit cards and loan against property and shares .

The bank also hopes to up its used vehicle portfolio exposure to Rs.2500crore from Rs.1000 crore . It is also into supply chain and vendor financing bought Deutsche Bank`s loss – making credit card business – a portfolio of around Rs.225 crore and 2 lakh customers and hopes to turn it around in a year . These diversification moves can help increase the disbursement avenues for the bank , and help it maintain better credit growth than the industry ..


Aggressive expansion of the branch network will help IndusInd Bank acquire more retail business on both the asset and liability sides . Over the next three years , it wants to more than double the current network of 300 . Indus Ind Bank has over the last four years raised capital every year to fund its credit growth .

Last fiscal , it had raised Rs.1,160 crore , which increased the capital adequacy ratio to 15.8 per cent . With current capital and internal accruals , the bank can maintain a capital adequacy of 12 per cent over the next two years . For a bank than has high exposure to retail loans , the gross NPA s stood at a reasonable 1.01 percent with a provision cover of 73 percent .

The restructured asset proportion is also low at 0.28 percent . At current price of Rs.255 the investment is suggested Accumulate more at
every opportunity of decline in the market price .

Chennai Plus

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