IndusInd Bank - Growth Outlook Steady; Aiming For An RoA Of ~2%: Motilal Oswal

Motilal Oswal Report

IndusInd Bank Ltd. has been delivering consistent performance, with both asset quality and return ratios improving steadily. The bank is well poised to report steady improvement in operating performance as all key vectors (credit cost, margins, and opex) continue to move in the right direction.

The steady loan growth and improving asset mix in favor of retail will further support margins, particularly as the rate cycle turns. Asset quality ratios have seen a mild deterioration amid a slight increase in stress in the MFI business; unsecured segments, however, remain well under control.

The recent RBI approval for setting up a wholly owned AMC reinforces confidence in the governance standards at the bank and raises hopes for management continuity as the term for the current MD and CEO is due for renewal in March 2025.

We estimate IndusInd Bank to report 13% earnings compound annual growth rate over FY24-26 as earnings growth accelerates to 22% YoY in FY26, resulting in an return on asset/return on equity of 1.8%/15.2%. We reiterate our Buy rating with a target price of Rs 1,700 (premised on 1.7 times FY’26E adjusted book value).

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