Shares of IndusInd Bank plummeted 19.82 per cent to ₹1,025.30 on the BSE on Friday during intra-day after it reported an unexpected drop in its second-quarter profit, and said it would miss its full-year loan growth target.
The Q2 profit fell due a rise in bad loans from its microfinance segment, which provides collateral-free loans to individuals with annual incomes of up to ₹3 lakh.
On Thursday, IndusInd Bank reported a 40 per cent decline in September quarter net profit at ₹1,331 crore, pulled down majorly by concerns about asset quality. The lender had earned a net profit of ₹2,202 crore in the year-ago period. However, total income rose to ₹14,871 crore (₹13,530 crore).
Shares of IndusInd Bank closed at ₹1,041.55 on the BSE, down 18.56 per cent..
The bank’s gross and net non-performing asset (GNPA, NNPA) ratio rose to 2.11 per cent and 0.64 per cent in Q2FY25, respectively, from 2.02 and 0.60 per cent a quarter ago. Segment wise, two-wheeler loans had 8 per cent GNPA ratio, micro loans had 6.5 per cent GNPAs and credit card NPAs stood at 3.3 per cent. The bank is among the largest MFI lenders in the country with ₹32,723 crore of outstanding micro loans as on September 30.
Uptick in delinquencies
“The unsecured business over the last three years has grown at a very rapid pace. As a consequence of that, whether it is lower ticket size or higher ticket size, loans have grown at a fast pace. I think there is a pause which is happening as everybody is seeing a slight uptick in delinquencies happening specifically on the credit card, and personal loan,” said Sumant Kathpalia, MD and CEO, IndusInd Bank
Unperturbed by deteriorated numbers, brokerages remain bullish on the stock. For instance, analysts at Anand Rathi said, ”We believe this was the most challenging quarter for the bank post-Covid related disruption and expect things to significantly improve in a couple of quarters. Ahead, we expect credit growth to pick up and slippages to moderate, leading to strong earnings.” It reiterated its Buy stance on the stock with a target price of ₹1,496.
Similarly, Sharekhan, maintaining Buy with a target price of ₹1,500, said: Slower loan growth, lower NIMs, higher credit cost than guided levels would keep the earnings/return ratio muted in coming quarters. However, the valuation has clearly factored in the intermittent headwinds. “We also acknowledge that the bank is placed better than most of the SFBs given the diversified book and better liability franchise, but it will be lower in our preference order until we see a clear outlook in terms of recovery in the overall growth and return ratio trajectory.”
Despite being favourably placed to capture turning rates table, volatile performance has been a key disappointment, said Elara Securities. However, it remaind bullish with a target price of ₹1,600 and a Buy call, said: “Scaling growth, improved liability, consistency and better return ratios may help a rerating, which looks elongated at this juncture.”
Meanwhile, Societe Generale on Friday sold ₹421 crore worth IndusInd Bank shares in an open market transaction. According to NSE bulk deal data, SG offloaded 39.30 lakh shares or 0.50 per cent stake in IndusInd Bank at an average price of ₹1,070.61. It bought back 29,725 shares at an average price of ₹1,083.79. Details of the other buyers were not known.
