IndusInd Bank soars 7% on in-line June quarter result, capital raising plan

On consolidated basis, IndusInd Bank reported 64.4 per cent decline in its net profit at Rs 510.39 crore in Q1FY21, compared to Rs 1,432.54 crore in year-ago quarter.
Shares of IndusInd Bank zoomed 7 per cent to Rs 564 on the BSE on Wednesday after the bank's June quarter earnings came largely in-line with analysts expectations. It's standalone net profit came in at Rs 460.64 crore for the first quarter ended June 30, down 68 per cent compared to a net profit of Rs 1,432.50 crore in the same quarter previous fiscal.

Analysts at ICICI Securities had expected the private lender's net profit to plunge 83.5 per cent year-on-year (YoY) to Rs 236.8 crore in the recently concluded quarter. Sequentially, the decline would have been 21.5 per cent from Rs 301.8 crore clocked in Q4FY20. Those at Edelweiss Securities, however, had expected the profit at Rs 433.8 crore.

On consolidated basis, IndusInd Bank reported 64.4 per cent decline in its net profit at Rs 510.39 crore in Q1FY21, compared to Rs 1,432.54 crore in year-ago quarter.

That apart, the bank's standalone total income was up at Rs 8,680.92 crore in April-June quarter, compared to Rs 8,624.62 crore in the same period last year, IndusInd Bank said in a regulatory filing. Net interest income grew by 16.4 per cent YoY to Rs 3,309.2 crore in the quarter under review.

On the asset quality side, there was slight impairment with the gross non-performing assets (NPAs) or the bad loans as a proportion of gross loans at the end of June 2020 coming in at 2.53 per cent, up from 2.15 per cent of the gross advances as on June 30, 2019. In absolute terms, the gross NPAs spiked to Rs 5,098.95 crore from Rs 4,199.66 crore.

The net NPAs, however, showed improvement as it fell to 0.86 per cent of the net advances by the end of first quarter FY21, from 1.23 per cent a year ago. In value terms, NPAs stood at Rs 1,703.37 crore as against Rs 2,380.51 crore.

"IndusInd Bank (IIB) reported a stable quarter as lower fee income and higher provisions (credit cost of 4.5% annualized) impacted earnings. On the other hand, lower opex and modest improvement in margins were a surprise," analysts at Motilal Oswal Financial Services said in a report. They have 'Buy' rating on the stock with a target price of Rs 700.

The bank's provisions for bad loans and contingencies for the reported quarter was raised by over five-times to Rs 2,258.88 crore as against Rs 430.62 crore in the year-ago period.

"Economic activity came to a standstill in April on national lockdown but started to recover slowly to pre-Covid levels by June on restrictions getting eased. In this backdrop as on June 
30, 2020, Bank held Covid-19 related provisions of Rs 1,203 crore (including provision made during the quarter Rs. 920 crore)," the bank said in its statement.

Capital raising plan

What further boosted buying sentiment at the counter was the lender's Board's approval to fund raising via preferential issue of up to Rs 3,288 crore.

"The board of directors at the meeting held on July 28, 2020 has approved issuance and allotment of 4,76,29,768 equity shares on preferential basis at an issue price of Rs 524 per share to Route One Offshore Master Fund, Route One Fund I, ICICI Prudential Life Insurance Co Ltd, Tata Investment Corporation and AIA Company Ltd -- together called the QIB allottees or the qualified institutional buyers," it added.

While 1,51,17,477 equity shares at the same issue price will be allotted to Hinduja Capital Ltd and IndusInd International Holdings (the Non-QIB allottees) on a preferential basis.

"The bank has raised capital through a preferential placement to a select group of investors while the promoters have agreed to put in capital as well. The total capital infusion of Rs33 bn would help improve tier-1 ratio by ~125 bps to 16% (CET-1 to 14.5%). The infusion by promoters would be taken as a strong positive sign," said analysts at Kotak Institutional Equities in a post-results update. They have 'Add' rating on the stock with a fair price of Rs 600. 

At 10:35 am, the stock was trading 4 per cent higher at Rs 548 on the BSE, as against 173 points, or 0.45 per cent, decline in the benchmark S&P BSE Sensex at 38,320.18 level. 

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