Most brokerages have turned bullish of the Indusind Bank shares after the company entered into an exclusivity agreement with Bharat Financial Inclusion Ltd to evaluate a possible merger between the two companies. The shares were trading at Rs 1,765 on Tuesday morning. Deutsche Bank has a buy rating on the stock with a target of Rs 1,850. Research and brokerage firm CLSA has maintained a buy on the shares with a target price of Rs 2,030. UBS is neutral with a target of Rs 1,800.
In an interview to CNBC-TV18, Nidhesh Jain, Analyst at Investec Capital Services said that he expects both the stocks to rally post deal. IndusInd bank shares have already returned 56% in the year. In comparison, the BSE Sensex has returned just 19% so far.
Speaking about the synergies for the companies, Romesh Sobti, the MD and CEO of IndusInd Bank told CNBC TV18 yesterday, “As far as Bharat Financial is concerned, they become a bank. Therefore, that gives a huge boost to the cost of liabilities, which means there’s a massive pricing differential in terms of cost of funds in the bank, which runs into 100 basis points lower.”
M R Rao, MD & CEO Bharat Financial Inclusion told CNBC TV18 that the cost to income ratio could fall below 40%, as the bank becomes tech-savvy. Further, he believes that the merger will help in adding more products. The veteran assured that nothing will change at the consumer touch points.
In an interview to CNBC TV18, Deven Choksey, MD of KRChoksey Investment Managers said, “I think we will have to wait and see how this particular integration of business makes sense for IndusInd.” The expert said that the cost of lending for micro-finance companies are unsustainable.
There have been a slew of deals between private sector lenders and MFIs as the former eye to expand their network in the hinterland which will help them meet the priority sector lending mandates and offer cross-sell opportunities.