Prabhudas Lilladher has raised its target price for IndusInd Bank to ₹1,150, citing better operational efficiency and the end of a balance sheet adjustment phase. The bank reported a 3.3% quarter-on-quarter loan growth led by its corporate segment and improved retail deposit levels.
Detailed Coverage
IndusInd Bank appears to be shifting its focus back to expansion as its recent period of balance sheet restructuring nears an end. Brokerage firm Prabhudas Lilladher recently updated its outlook, raising the price target on the bank's stock to ₹1,150, up from the previous ₹960, while maintaining an 'Accumulate' rating. This change reflects growing confidence in the bank’s core profitability, which exceeded expectations by 8.5% in the latest quarter due to better-than-anticipated fee income and tighter control over operating costs.
Moving Beyond Balance Sheet Adjustments
For investors, the most significant update is the conclusion of the bank's balance sheet recalibration. This process, which impacted loan growth from the fourth quarter of fiscal year 2025 through the same period in 2026, was a defensive move to stabilize the bank's asset quality. With this phase largely behind it, the bank is now seeing signs of momentum, particularly in its corporate loan segment, which helped drive a 3.3% growth in total loans compared to the previous quarter.
MFI Segment and Deposit Stability
The bank has also seen a stabilization in its Microfinance Institution (MFI) business. This segment, which currently accounts for roughly 5% of the total loan portfolio, had previously been a point of concern regarding asset quality. The bank has indicated a strategy to grow this book to 7% of its portfolio in the coming quarters. Furthermore, the bank’s funding profile is showing signs of strengthening, with its Liquidity Coverage Ratio—a measure of how well the bank can meet short-term obligations—climbing to 49.5%. This is a notable improvement of 160 basis points over the last quarter and 320 basis points compared to the same period last year.
Earnings Trajectory and Valuation
The updated valuation multiple of 1.2x the estimated fiscal year 2028 book value reflects the brokerage's view that the bank's earnings are on a more predictable path. An important contributor to the recent performance was a one-time income tax refund of ₹2.8 billion, which provided a boost to the bottom line. Investors looking ahead should track whether the bank can maintain this momentum in corporate lending and how effectively it manages the growth of its MFI portfolio without seeing a return of the stress that characterized previous quarters. The speed of credit growth and the bank's ability to maintain stable deposit costs will be the primary factors determining if the current growth trajectory remains intact.