Qualitative Fundamental Analysis of Indusind Bank Shares

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Why should you invest in IndusInd bank Shares

 

Qualitative Fundamental Analysis of Indusind Bank Shares

 

Indusind bank shares which gave 23% consistent returns from 2008 to a decade. It was founded in the year 1994. The revenue of the bank is 36,002 crores INR (2020). The operating income of the bank is 10,772 crores INR (2020). whereas the net income of the bank is 901.15 crores IND(2020).

It is a new generation bank, which offers commercial, transactional, and electronic banking products and services. It was started in April 1994 by union finance minister Manmohan Singh. It is the first private bank in India.

It was started under the chairmanship of Srichand P Hinduja, with the primary objective of serving the NRI community, With operations of 10 billion in the capital, where 60 crores raised by Indians and 40 crores by NRI’s.

It has its footprints in the banking industry with over 2.5 crore customers and about 2000 branches across the country.

The company was promoted by IndusInd enterprises and finance Ltd. (IEFL), Five (Mauritius) based companies viz. IndusInd Ltd. IndusInd international holdings Ltd. (IMHL), IndusInd ltd. (IL) IndusInd investment Ltd. (IIL) Defective Mauritius holdings Ltd.(DEMHL).

They offer a wide cluster of products and services to individuals and corporates includes Branch banking, Consumer finance, Corporate banking and finance, commercial and transactional banking, CMS, TSU, Depository, and treasury operation, wealth management, Microfinance, Personal and commercial loan, Vehicle loan, Credit card, SME loans, etc.

The bank has multi-lateral tie-up with banks providing access to more than 18,000 ATMs for their customers. They enjoy clearing bank status for both major stock exchanges- NSE AND BSC and NMCE. They are rated as one of the top-performing banks in the various survey reports.

The company’s shares were listed and admitted for trading on the exchange with effects from October 1, 2010, Friday with 5 crore equity shares of Rs.10/- each to QIBs pursuant to Qualified Institutional placement. These shares are ranked pari-passu with existing equity shares of the company.

The shares were full subscribers and the allotment of shares was held on 24th September 24, 2010. The issue price of the share was RS. 234.55/-.

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Business Overview of Indusind Bank Shares:

 

IndusInd bank was the vision of Srichand P Hinduja, a non-resident Indian businessman and head of Hinduja groups. A decade after its incorporation, in June 2004, the bank was merged with Ashok Leyland Finance, which is among the largest leasing finance and hires purchase companies in India.

It has emerged as one of the fastest-growing banks in the banking sector in India. Currently, it has 1558 branches and 2453 ATMs spread across different geographical locations of the country.
IndusInd Bank, which began in 1994, boats of 573 branches, and 1055 ATMs spread across 392 locations of the country. We also have representative offices in London and Dubai, catering to every need of the customer-
The bank has entered into a strategic alliance with Religare Securities for offering a value-added 3–in–1 savings accounts–linked package to customers –– comprising a savings bank account, a depository account, and an Internet trading account.

Products and Services of Indusind Bank:

In Personal banking, it offers a wide range of products and services like deposits, loans, investments, insurance, forex services, Demat services, online services, and wealth management services.
In NRI banking it offers money transfer, investment products such as international deposits, mutual funds, online share trading, etc. The bank also offers property solutions and insurance loans.

Awards/Achievements:

  • Awarded the ‘Best Priority Sector Bank’ amongst the private sector banks by Duns & Bradstreet
  • Most Improved Bank Performance of the Year’ awarded by Bloomberg UTV Financial Leadership Awards 2011
  • Winner of ‘Best Use of technology in training and e-Learning Initiatives’ awarded by IBA Banking Technology Awards 2010.
  • Award for the “Best Bank Mid-sized” in Business world–PwC Best Banks Survey 2011.
  • Awarded as the “Best Mid–Sized Bank Bank” in Business Today –KPMG Best Banks Survey 2011.
  • M.IT.R– 50 Marketing & IT Recognition Program amongst top 50 brands – organized by Paul Writer in association with IBM.
  • The CII Environmental Best Practice Award 2012 for the “Most Innovative Project”
  • Award in the “Business Enterprise Services” category for running ATMs on solar power – Organized by Panasonic Green Globe Foundation.
  • Awarded “The best bank award among small banks for ‘IT for Operational Effectiveness’ by Institute for Development and Research in Banking Technology (IDRBT).
  • CISO – Awarded one of the Top 100 Chief Information Security Officer awards 2014.
  • NASSCOM IT User Award 2012 for “Environmental Sustainability”.
  • Award as “BEST BANK 2015” by Business India.
  • Making of development India (Modi) award in 2018.
  • IDC FIIA 2019 Financial Insight Innovation Awards presented – Asia’s leading partner banks.

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Banking industry overview in 2020:

 

COVID-19 pandemic is one of the biggest health and economic crises that the modern world has witnessed. Disruptions brought by the pandemic have impacted businesses and the banking, financial services, and insurance (BFSI) sector.
Financial firms responded quickly to ensure business continuity during the pandemic. As they navigate the crisis technology is going to play a major role to differentiate the strong players from weaker ones.
From an NBFC point of view, the sector goes through its own challenges through the lockdown with its collections. Even with its own liquidity issues that the industry had been facing was very difficult.
Technology is playing an extremely important part of communication. During this time the industry has become much closer to the customers. Both the industry and clients have relatively more matured.
Asset allocation and diversification have been the key. Digital learning company faces the transition of acceleration in a trend that was already in place, and temporary tends which are going to go away after normalcy. India has been on a secular path towards digitalization. so, digital adoption is suddenly getting accelerated now.

Challenges faced by banks:

 

Indian economy is witnessing path-breaking reform measures. The financial sector has also been undergoing a
metamorphic change. Today the banking industry is stronger and capable of withstanding the pressures of
any situation and crisis.
Indian Banks have adopted internationally accepted norms With higher disclosures and transparency. The Indian banking industry is gradually moving towards adopting the best practices in accounting, corporate governance, and risk management.
The Indian banks are subject to tremendous pressures to perform as otherwise, their very survival would be at stake.
Information technology (IT) plays an important role in the banking sector as it would not only ensure the smooth passage of interrelated transactions over the electric medium but will also facilitate complex financial product innovation and product development.
The application of IT and e-banking is becoming the order of the day with the banking system
heading towards virtual banking.
Senior leaders in financial services working at a breakneck speed. More than digital transformations there were business model transformations, comprehensive automation of the existing systems accelerated.
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Financial analysis of Indusind Bank Shares:

 

The share price of IndusInd bank used to trade at RS.1500 once but dropped to 350-400 levels later. Sometime later when there was a lot of news related to bank following which Hinduja groups also asked to increase their stake, from then their bank shares again went up. And now trades at RS. 900.

Banks accumulate all the money earned from savings accounts, current accounts, fixed deposits. All the accumulated money which is lent by the banks, in turn, has to pay 10% interest, and the banks get 13% interest from the customers where 3% is the profit to them.

To talk about the overall loan book, any loan provided by banks mainly goes into two things – Corporates, which provides loans to corporate companies, and the second one is retail, which is loans distributed on retail by the banks.

 

The loan book quality of IndusInd bank looks stable over 2.45% at GNPA and  0.91% at NNPA. There was Revenue growth of 32%; NII up by 45%; Fee up by 14% in the financial year 2020.

  • Strengthened Balance Sheet by improving PCR to 63% with floating provisions of Rs. 260 Cr.
  • Revenue growth of 32%; NII up by 45%; Fee up by 14%
  •  NIM up by 10 bps to 3.59% LY
  • Credit growth up 11% and Deposit growth up 4%; LCR retail deposit growth up 34%
  • Consol PAT at Rs. 315 crores
  • PPOP at Rs.2,858 Crore, grew by 38% YoY; PPOP / Assets of 3.84% amongst the industry highest
  • EPS grows to Rs. 64.33 from Rs. 54.90(LY)
  • Client base stable is around 25 million in the year 2020.
Current Price (Rs.) 900.15
Face Value (Rs.) 10
Book Value (Rs.) 381.51
52 Week High (Rs.) 1834.40 (28-Mar-19)
52 Week Low (Rs.) 1188.05 (01-Oct-19)
Life Time high (Rs.) 2038.00 (03-Aug-18)
Life Time low (Rs.) 8.50 (18-Sep-01)
Exchange Symbol INDUSINDBK (NSE)
Average Daily Movement [ADM] 39.04
Average Volume [20 days](No. of shares) 11326859
Market Cap (Rs. in Cr) 97063.39 (Cr)
1 Month Return (%) -6.22
P/E Ratio (x) 21.56
% of Promoter holding pledged 26.33

Their loan growth rate is 22% in FY 2020, where their expected growth rate ranges from 25%-30%.

The CASA ratio is 40% as expected by the bank in FY 2020. Revenue growth exceeds balance sheet growth by 23%.

The domestic ratings they go are CRISIL AA + for Infra Bonds program; CRISIL AA for Additional Tier I Bonds program; CRISIL A1+ for a certificate of deposit program / short term FD program; IND AA+ for Senior bonds program by India Ratings and Research.

The growth of net profit has been 12% where the operating profit grows up to 38% for the financial year 2020. This shows that amid the covid-19 situation the company is trying to accelerate its transaction and amount of cashflow into the business.

The companies shares have fallen down to RS.200 when the country had covid-19 surging to its peak. The market has reacted badly due to the emotional trauma of the investors at the fear of faster increasing covid-19 cases.

And now when the country slowly moving to its New-Normal, where pharma companies which come forward with the vaccination for the disease, and when investor getting over the fear, the share price slowly goes up.

It is the right time to invest in this share as the market analysis by the experts and the target price is 16000 for the NIFTY, we might feel the price of large-cap company’s movement in huge points.

The current business models have changed and new strategies have been adopted, we may see the banking and IT industry dominating the movement in the price of NIFTY and SENSEX.

 

 

 

 

 

 

 

 

 


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