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IndusInd Bank surges 3% ahead of Q1 results; here's what analysts expect

Reports suggest the bank may announce a fund raise of nearly $400-500 million post its board meeting today
Shares of private lender IndusInd Bank were trading 3 per cent higher at Rs 522 on the BSE on Tuesday ahead of its April-June quarter result for the financial year 2020-21 (Q!FY21). A combined 2.68 million shares had changed hands on the counter on the NSE and BSE till 9:37 am, when the stock was quoting at Rs 519 apiece, up 2.4 per cent on the BSE. In comparison, the benchmark S&P BSE Sensex was at 38,222.29 level, up 287.56 points or 0.76 per cent. 

Recently, the bank received the Reserve Bank of India (RBI's) nod to allow Hedge fund Route One Investment to double its stake in the lender. "Route One, which owns a 4.96 per cent stake in the bank, had approached the RBI to increase the stake to 10 per cent in accordance with the master directions and the central bank made a reference on the same to IndusInd, it said. At its meeting on July 5, the bank's board granted its approval for the proposal," it said in a regulatory filing. READ HERE

That apart, reports suggest the bank may announce a fund raise of nearly $400-500 million post its board meeting today. "US-based hedge fund Route One Investment Company (ROIC) could be the anchor investor, chipping in nearly half of the total fund raise. Besides, IndusInd promoters, the Hinduja brothers, are also likely to convert their warrants into shares once the fund raising exercise is complete," a report by The Economic Times said.

In a regulatory filing, the bank had said that it would consider raising funds through equity shares on a preferential basis during Tuesday's board meeting. READ HERE

So far in the financial year 2020-21, the stock has outperformed the benchmark and sectoral indices, ACE Equity data shows. Till Monday, the stock price of IndusInd Bak has surged 44 per cent as against a 29 per cent gain in the benchmark S&P BSE Sensex. The S&P BSE Bankex index, on the other hand, has gained 12.3 per cent during the period.

ICICI Securities

Analysts at the brokerage see the private lender's net profit plunging 83.5 per cent year-on-year (YoY) to Rs 236.8 crore in the recently concluded quarter from Rs 1,432.5 crore logged in the year-ago period. Sequentially, the decline would be 21.5 per cent from Rs 301.8 crore clocked in Q4FY20. The brokerage sees net interest income (NII) at Rs 3,150.4 crore, a marginal dip of 2.5 per cent quarter-on-quarter (QoQ), but 11 per cent growth on  yearly basis, on the back of muted advances growth at 4 per cent YoY to Rs 200,357 crore, and deposit growth of 4.9 per cent QoQ to Rs 211,970 crore despite outflow of government deposits in Q4FY20.

"Furthermore, lower moratorium book in Q4FY20 provides comfort for delinquency shock, going forward. GNPA and NNPA ratio are seen at 2.4 per cent & 1 per cent, respectively. Replacement of borrowings by retail deposits would entail reduction in the cost of funds. However, a reduction in CoF would be offset by a decline in yields, thus keeping net interest margin (NIMs) broadly stable at 4.2 per cent. Muted business growth and elevated credit cost at 125 bps are expected to lead to moderation in PAT at Rs 237 crore," it said in a results preview note.

Edelweiss Securities

The brokerage sees the pre-provision profit (PPOP) at Rs 2,899.5 crore for the quarter under review, clocking a growth of 12 per cent YoY from Rs 2,591 crore reported in Q1FY20. The same was Rs 2,836.2 crore in the March quarter of FY20, leading to a sequential growth of 2 per cent. The net profit, however, is seen at Rs 433.8 crore, up an impressive 44 per cent QoQ.

The analysts at the brokerage believe that credit costs will be elevated due to higher provisioning for Covid-19. Besides, on the asset quality front, delinquency trends in CV portfolio and MFI portfolio needs to be looked at, they said in a results preview report.

Phillip Capital

Analysts here have an outlier estimate for the bank's net profit for this quarter. They peg the PAT at Rs 585.2 crore, up a whopping 94 per cent QoQ, and therefore down just 59 per cent YoY. Meanwhile, the revenue is seen at Rs 4,831.4 crore, up 7.2 per cent YoY from Rs 4,507.2 crore (Q1FY20), but down 3.4 per cent QoQ from Rs 5,003.2 crore (Q4FY20).

Further, they expect net interest income of Rs 3,200 crore (up 11 per cent YoY but down 2 per cent QoQ), and NIM at 4.2 per cent.

The bank, the brokerage noted, is expected to enhance the floating provision in Q1FY21 from Rs 260 crore floating provision in Q4FY20. The slippages are seen at Rs 1,200 crore the for June quarter of FY21, down a significant 41 per cent sequentially from Rs 2,028 crore seen in Q4FY20. The same was Rs 725 crore in Q1FY20.

Motilal Oswal Financial Services

According to the brokerage, the lender's asset quality may remain under pressure led by higher strain on MFI and auto business. The gross NPA ratio is seen rising to 2.7 per cent from 2.5 per cent in Q4FY20. The net NPA ratio, meanwhile, is seen flat at 0.9 per cent. The provision coverage ratio is expected to improve sequentially to 67 per cent from 63 per cent in Q4FY20, which the brokerage says, may lead to an elevated credit cost.

The profit before tax is seen at Rs 996 crore, down from Rs 2,160.3 crore reported in Q1FY20, but up from Rs 416.4 crore in Q4FY20. The net profit is seen at Rs 745 crore.

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