Maintain ‘add’ on IndusInd Bank on strong execution, target price Rs 460

We raise our target price to Rs 460 from Rs 430, revising our estimates upwards and rolling the estimates (12 months) forward, which, therefore, implies 2.7x P/BV and 19x EPS. Further, we expect PPoP growth at ~25% CAGR for FY13-15e and RoEs in the range of 15-16%.

IndusInd Bank reported a strong and consistent quarter with healthy earnings growth of 30% y-o-y, supported by robust revenue growth (34% y-o-y). Q3FY13 results showed further improvement in NIMs, while other broad operating metrics looked stable q-o-q.

NIM improvement continued in the current quarter (around 20 bps q-o-q), led by easing of deposit rates. The trend should continue in the medium term. Most other operating metrics reported stable trends. For instance, loan growth was healthy at 31% y-o-y, gross NPLs stood at 1% and net NPLs stood at 0.3%, which were similar to the previous few quarters.

Nearly all non-interest income streams delivered more than 30% y-o-y growth.

In our view, the growth outlook looks comfortable, but a shift in the loan profile is likely to happen. Nonetheless, history continues to provide comfort.

We believe that loan growth, which stands around 30% CAGR at present, has the potential to continue in the medium term as the bank has done exceedingly well on loan impairments (retail and corporate).

However, the contribution from retail (nearly 50% of loans) is likely to decline as competition

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