Should you invest in IndusInd Bank after 3-fold rise in Q4 net profit?

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Analysts retained their bullish on IndusInd Bank after its reported nearly three-fold jump in standalone net profit at Rs 876 crore for the last quarter of the fiscal ended March 2021. It had posted a net profit of Rs 301.84 crore in the corresponding quarter of 2019-20.

Brokerage Anand Rathi Share & Stock Brokers set a target price of Rs 1070 post Q4 results, indicating an upside of 14% from Friday’s closing of Rs 934.95. The scrip traded 1.13% higher at Rs 945.55 at around 10 am (IST). On the other hand, the Sensex was down 323 points, or 0.66%, at 48,458 at around the same time.

Total income of the private sector bank was slightly up at Rs 9,199.48 crore in Q4 FY21 as against Rs 9,158.57 crore in the same period of the previous fiscal. However, on a full-year basis, the net profit fell by nearly 36% to Rs 2,836.39 crore in 2020-21 as against Rs 4,417.91 crore in 2019-20.

Gross non-performing assets (NPAs) of the bank rose slightly to 2.67% of the gross advances as of March 31, 2021, from 2.45% by end of March 2020. Net NPAs, however, softened to 0.69% from 0.91%.

Provisions for bad loans and contingencies during the reported quarter fell to Rs 1,865.69 crore as against Rs 2,440.32 crore put aside in the year-ago period.

“Indusind bank’s Q4 FY21 asset quality was better than expected. Slippages of 0.9% of loans, 98% collection efficiency, strong retail deposit growth, sturdy balance sheet with 75% coverage and Rs 1600 crore provision buffer, strong liquidity and capitalisation are among key positive for the quarter,” Anand Rathi said in a report.

While upgrading the target price to Rs 1,100 (from Rs 1,050), ICICI Securities said that the management is geared to pedal growth ahead with a focus on certain segments.

“Improvement in capitalisation levels post warrant subscription by management to aid strength for balance sheet expansion. We expect business momentum to pick up from here on with corporate re-alignment largely achieved. Asset quality is expected to improve in FY22E, though the impact of second-wave needs to be assessed. The bank has conservatively provided its unsecured, MFI loans and has ample provisions on books, which should reduce earnings volatility.” the brokerage said.

On the other hand, Prabhudas Lilladher also maintained ‘Buy’ on IndusInd Bank with a price target of Rs 1,195. “We expect loan growth will continue to be slower at 8-10% in FY22 as the bank continues to re-calibrate its assets but improve ahead, while deposits side it is demonstrated strong comeback,” Prabhudas Lilladher added.