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Analyst Meet      
          IndusInd Bank
The strategy of focusing on the Consumer financing particularly in Tier 2, 3 and 4 cities will continue


Highlights of the interaction with Mr. Sanjay Mallik, Head Investor Relation & Strategy, Indusind Bank on 15 December 2011

Management has given a loan book growth guidance of 25-30%, 25% in case of overall slowdown and 30% if things improve from hereon. Consumer financing will continue to play major role and management has plans to take it to about Rs 25000 crore in next 3 years from current book of Rs 14080 crore.

The entire consumer finance book is at fixed rate and if the rates are presumed to be peak and will only go down in FY'13, then NIM's can improve from current 3.35%.
CV's particularly the LCV funding played a major role in Consumer financing. Of the total advances, about 22% would be commercial vehicle loans, 6% each would be three wheeler loans and equipment financing, 4% each would be 2 wheeler and car loans, 3% would be utility vehicles and the rest others.

The corporate loan book is of about Rs 16000 crore, of which nearly 95% are working capital funding and rest is term loans. The company is not into infrastructure or project financing as yet and the strategy of management is to continue to focus only on working capital till FY'12.

The company may scale down some of its exposure to corporate funding side. The Corporate funding business constituted around 60% of total advances in FY'08 and which is now around 53% and the internal target is to bring it to around 50% by FY'14.

The strategy laid in FY'08 clearly paid very well for the company. The strategy in terms of focusing on the Consumer financing particularly in Tier 2, 3 and 4 cities will continue in terms of new targets for FY'14 as laid by the management. New products within consumer financing like Used CV loans, Loan against Property, Car loan business etc were introduced 2 years back and complement the existing products to offer to customers in consumer finance business.

The management is taking adequate precautions in consumer book. Almost 97% of the CV book is to SRTO and only 3% are to fleet operators. The entire SRTO book comes under Priority sector financing and the company is well above the regulatory mandate of Priority financing as required by RBI.

According to the management the PCR of about 72% is decent given the history of NPA's and their loan book. Going forward run rate of around 70% will be maintained.
The bank does sell some of the Mortgage products of HDFC's and earns its commission income. Currently, the bank has basket of products to offer to the customers in terms of cross sell insurance, medical, credit cards, debt restructuring and syndication, LC discounting etc. Management has given guidance that going forward the fee income will grow around 30% and will exceed the loan book growth.

Current microfinance exposure is around Rs 53 crore of which Rs 27 crore are restructured and rest are standard. Only after the Microfinance bill, management will take a call for this business.
Nearly 70% of total customers are repeat customers for the bank in terms of new business. The strong relationship with customers is the priority for the bank and it wants to be future HDFC bank for the customers.
Although there are signs of slowdown in auto industry in general and CV's in particular, for Indusind bank, the Used CV product as per the management will grow more than 30% given the low base and New CV might grow around 15%.

In all, from the current base of consumer loan book of around 14000 crore, with target of about 25000 crore by FY'14 and equal figure of Rs 25000 crore for corporate assets, management expects its total deposit requirement to be some where around Rs 75000 crore by FY'14 of which 1/3rd would be from CASA which is around 34% as compared to current 28%.

From current branch network of around 350, management has set target to reach to around 400 by FY'12, 500 by FY'13 and about 650 by FY'14.

Edited by shontou - 16/Dec/2011 at 2:25pm

           IndusInd bank
Plans to tap primary markets in FY13 for capital requirements and for meeting RBI guidelines on reducing promoter's stake to 10%


IndusInd Bank has come out with financial results for the quarter ended June 12 and has conducted concall to discuss financial performance and prospects of the bank. Romesh Sobti – Managing Director and CEO along with his colleagues addressed the call

Highlights of the call are:

Consumer Finance Division (CFD) book led the growth in the advances during the quarter. Advances of the bank grew 31% y-o-y and 6% q-o-q to Rs 37245 crore of which CFD grew 48% y-o-y and 9% q-o-q at Rs 18761 crore and Corporate and Consumer Banking (CCB) book grew 18% y-o-y at Rs 18484 crore.

Used Vehicle loans constituted 13-15% of the quarterly disbursements of bank's CFD book. Disbursements in CFD book grew 50% to Rs 3766 crore in the quarter under review against Rs 2506 crore in the corresponding previous quarter. Most of the used vehicle loans pertain to Commercial Vehicle loans. Commercial Vehicle book constituted major 47% of the CFD book and 24% of the total loan book. Despite slowdown in the Commercial Vehicle market, the management expects this book to grow well, as it is one among the front runners in CV credit business(besides HDFC Bank).

On the CCB book front, Share of credit to NBFC and pharma sectors has declined from 5.40% in March 12 to 4.38% in June 12 and 3.27% to 1.32% respectively. On the other hand, the share of credit to power sector has inched up to 2.52% in quarter under review against 1.91% in the quarter ended March 12. Exposure to Gem and Jewellery sector has also increased to 1.72% against 1.36% a quarter ago.

Deposits grew 28% y-o-y and 6% q-o-q to Rs 45076 crore at end of June 12. CA growth remained muted at 10% y-o-y at Rs 7418 crore. On the other hand, while SA accretion remained robust 59% y-o-y, it remained moderate at 9% on q-o-q basis at Rs 5139 crore. Average SA interest rate for the bank stands at 5.7%. CASA deposits grew 26% y-o-y and 9% q-o-q to Rs 12557 crore and constituted 27.9% of the total deposits in quarter under review against 27.3% a year ago.

Whole sale fixed deposits (including Bulk and CD's) constituted 50% of the total deposits. Retail term deposits constituted 22% of the total deposits. The bank remains choosy to raise wholesale deposits considering the liquidity and cost of funds.

CD ratio has inched up 82.6% in quarter ended June 12 against 80.5% a year ago.

Yield on advances inched up to 13.95% against 13.91% a quarter ago as the CFD book is almost a fixed book. Cost of deposits jumped up 8.86% against 8.27% a quarter ago. NIM declined to 3.22% in quarter under review against 3.29% a quarter ago and 3.41% a year ago.

Fee income from distribution of third party products grew modestly by only 12% y-o-y to Rs 56.44 crore as the bank has stopped booking non life income business in this head. Recently, IRDA has penalized IndusInd Bank (Rs 15 lakh) for receiving payments from the Chola MS over and above the permissible commission limits there by violating Section 40A(3) of Insurance Act 1938.

Investment book grew 15% y-o-y to Rs 16308 crore for the quarter ended June 12. Outstanding RIDF book stood at Rs 1315 crore. The management has noted that RIDF investments are now witnessing a decline as the bank is meeting its PSL requirements.

Capital Adequacy ratio stood at 12.86% with Tier I at 10.62% at end of June 12 against 13.85% with Tier I of 11.37% at end of March 12. Including profits CRAR stood at 13.42% with Tier I of 11.19% at end of June 12. According to RBI guidelines the bank has deadline till end of December 12 to reduce promoter's stake to 10% from the current existing 19.4% at end of June 12. The management expects to hit primary markets and expand equity by end of FY13 so as to meet the RBI guidelines and also capital requirements. Risk weighted assets at end of June 12 stood at Rs 37529 crore of which Rs 28301 crore are fund based exposure.

Credit cost increased to 12 bps in quarter ended June 12 against 10 bps in the quarter ended March 12 mainly on the back of delinquencies in CCB book. The management targets credit cost at around 50 bps for FY13 against 41 bps for FY12. The bank has taken a mid size Gem and jewellery account as NPA during the quarter. However, the account has 50-60% collaterals and is expected to be recovered soon. On the other hand, there is no stress seen in CFD book.

While the slippages in the CFD book has decline in the quarter, the credit cost in CFD book has increased to Rs 23.85 crore (against Rs 20.37 crore in the quarter ended March 12). Of this, major portion of Rs 16 crore was provided on account of loss of sale of repossed assets.

The Bank has widened its spread by adding 21 branches and 43 ATM's during the quarter taking the branch count to 421 and ATM count to 735 respectively at end of June 12. It remains aggressive on branch expansion and targets to reach 500 branches by end of FY13 and 650 branches by FY14.

The employee count has also increased 34% to 10460 at end of June 12. The cost to income ratio has increased to 49.7% in June 12 against 48.5% a year ago. Going forward, the management expects cost to be under control as the major structural cost of zonal offices had already been absorbed and so only cost per branch will only be considered.

Book value has improved to Rs 101.69 per share while that of adjusted book value stood at Rs 99 per share at end of June 12. ROE improved to 20.35% against 20% a quarter ago and 18.41% a year ago.

Hope the good run continues ..