Broker’s call: Indian Bank (Buy)
Broad-based RAM growth of 17.7% and improving asset quality, with GNPA/NNPA at 1.61/0.14%, underpin the bank’s growth trajectory
Indian Bank reported robust operating performance in Q2-FY27, with advances surging 16.4% year-over-year, NII increasing 17.8% and PAT growing 14.7% to ₹3,460 crore. Broad-based RAM expanded by 17.7% and asset quality improved, with GNPA/NNPA at 1.61/0.14%. Management revised FY27 advance growth guidance to 13-14% and deposit growth guidance to 11-12%, while anticipating a 5-7 basis points NIM expansion in Q3-FY27.
Repo-rate transmission and delayed deposit repricing contributed to this outlook. However, some loan growth was driven by Rs210bn of FCNR(B) mobilisation. Indian Bank has allocated ₹2,500 crore towards ECL against an estimated impact of ₹3,500 crore, leaving a potential incremental provisioning of ₹1,000 crore, excluding HTM valuation changes.
The bank is expected to deliver a superior ROA of around 1.2% and ROE of 16-17% over FY27-29E, supported by strong asset-quality performance, a solid capital buffer and competent management. Consequently, the analysts maintain a Buy rating on Indian Bank with a target price of ₹1,000, valuing the bank at 1.5x Sep-28E adjusted book value.
Key risks include macro dislocation affecting growth and asset quality, and potential merger of other weak PSBs with Indian Bank.
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