RESEARCH: BNP PARIBAS
RATING: BUY
CMP: RS 149
Since 10 June ‘09, IndusInd Bank (IIB) has returned 95% backed by a consistent delivery on the six core operating goals committed to by the management team. BNP Paribas is revising the FY11 loan growth estimate to 26% from the current 20%, and core fee income from 30% to 27%. On credit costs, gross non-performing loans (GNPL) percentage has been changed from 1.55% to 1.42%, which accounts for a 48% yo-y growth in GNPL (including write-offs). BNP expects IIB to clock a NIM of 3% in FY11 on the back of a CASA ratio of 25.5%. BNP expects IIB to add another 100 branches in FY11 taking the FY11 tally to 310. This branch expansion will also benefit from RBI’s relaxation regarding branch licensing norms especially in Tier 3-6 locations. The management guided towards converting approximately 100 of their 486 distribution outlets into full-fledged branches over a period of time. BNP expects some proportion of the FY11 addition of 100 branches to come from the conversion of distribution outlets into branches. The management expects to launch the re-branding exercise in FY11. BNP anticipates another $100 million in capital issuance and are taking in a 10-12% equity dilution in the H2FY11. BNP is increasing the target price to Rs 180 from Rs 150 on the back of the upward revision in estimates and is expecting a 29% growth in net profit and a 16% growth in EPS (EPS growth lower due to equity dilution)