TARGET INR180.

00
IndusInd Bank IIB IN PRIOR TP
CLOSE
INR150.00
INR153.75
BUY
INDIA / BANKS UP/DOWNSIDE +17.1% UNCHANGED

HOW WE DIFFER FROM THE STREET INDUSTRY OUTLOOK Ï CHANGE IN NUMBERS

BNP Consensus % Diff
Target Price (INR)
EPS 2010 (INR)
180.00
8.08
175.00
7.95
2.9
1.6
More steam left
EPS 2011 (INR) 9.38 10.70 (12.3) ƒ Expect loan growth of 26% in FY11 and PAT growth of 29%.
Positive Neutral Negative ƒ 100 new branches, CASA of 26%, and a NIM of 3%.
Market Recs. 9 0 1 ƒ Baking in equity dilution of 10-12% in 2HFY11.
KEY STOCK DATA ƒ Raise TP to INR180 (2.8x FY11E BV for an ROE of 16%).
YE Mar (INR m) 2010E 2011E 2012E
Meeting goals aplenty
Operating profit 4,769 6,166 8,586
Since our recommendation on 10 June
Rec. net profit 3,116 4,008 5,581 2009, IndusInd Bank (IIB) has returned
Recurring EPS (INR) 8.08 9.38 12.67 95% (compared with the Bankex at 15%)
Prior rec. EPS (INR) 7.14 9.20 12.08 backed by a consistent delivery on the six
core operating goals committed to by the
Chg. in EPS est. (%) 13.1 2.0 4.8
management team (see Exhibit 1).
EPS growth (%) 89.2 16.1 35.0
Recurring P/E (x) 19.0 16.4 12.1 What to expect in FY11
We are revising our FY11 loan growth Vijay Sarathi, CFA
Dividend yield (%) 1.2 1.5 2.1
estimate to 26% from the current 20%, +91 22 6628 2412
vijay.sarathi@asia.bnpparibas.com
Price/book (x) 2.7 2.1 1.9 core fee income from 30% to 27%. On
ROE (%) 15.5 14.7 17.0 credit costs, our GNPL percentage has Abhishek Bhattacharya
+91 22 6628 2411
ROA (%) 1.00 1.03 1.16 been changed from 1.55% to 1.42%, abhishek.bhattacharya@asia.bnpparibas.com
which accounts for a 48% y-y growth in
(INR) IndusInd Bank (%) GNPL (including write-offs). We expect IIB to clock a NIM of 3% in FY11
170 Rel to MSCI India on the back of a CASA ratio of 25.5% (compared to the 22.5% in
134 3QFY10).
120
84 We expect IIB to add another 100 branches in FY11 taking the FY11 tally
70 34 to 310. This branch expansion will also benefit from RBI’s relaxed
20 (16) regarding branch licensing norms especially in tier 3-6 locations. The
Feb-09 May-09 Aug-09 Nov-09 Feb-10
management guided towards converting approximately 100 of their 486
distribution outlets into full fledged branches over a period of time. We
Share price performance 1 Month 3 Month 12 Month expect some proportion of the FY11 addition of 100 branches to come
Absolute (%) (1.6) 2.7 258.3
from the conversion of distribution outlets into branches. The
management expects to launch the re-branding exercise in FY11. We
Relative to country (%) (6.5) (0.9) 79.9
anticipate another USD100m in capital issuance and we are baking in a
Next results/event April 2010 10-12% equity dilution in the 2HFY11.
Mkt cap (USD m) 1,367
Valuation
3m avg daily turnover (USD m) 2.6
We are increasing our TP to INR180.00 from INR150.00 on the back of
Free float (%) 50 the upward revision in estimates discussed above. We are expecting a
Major shareholder Indusind International Holding (26%) 29% growth in net profit and a 16% growth in EPS (EPS growth lower
12m high/low (INR) 156.25/27.40 due to equity dilution). At our revised TP of INR180.00, IIB is valued at
2.8x FY11E ABV of INR65.00 for an FY11E ROE of 16.1%.
3m historic vol. (%) 46.2
Sources: Bloomberg consensus; BNP Paribas estimates

RECENT COMPANY & SECTOR RESEARCH

2QFY10 – Superlative performance .................. 15 Oct 2009
Increasing TP to INR100 ...................................... 24 Jul 2009
Loan growth inching back.................................. 18 Jan 2010
Focus on CASA now .......................................... 16 Nov 2009

BNP Paribas Securities Asia research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://equities.bnpparibas.com. Please contact your
salesperson for authorisation. Please see the important notice on the back page.

19 February 2010
VIJAY SARATHI, CFA INDUSIND BANK 19 FEBRUARY 2010

Exhibit 1: Progress On Performance Signposts For IndusInd Bank

Year-end 31 Mar (%) 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10

ROA 0.71 0.75 1.25 1.08 1.12

Adjusted ROE* 13.5 15.0 25.7 18.5 17.7

Net interest margin 1.95 2.48 2.60 2.86 2.94
Cost to income ratio 58.3 51.8 48.8 54.4 50.9
Net NPL ratio 1.30 1.14 1.01 0.98 0.67
Annualized revenue per employee (INR m) 2.5 3.0 3.0 2.9 2.9
* Based on adjusted BV
Sources: IndusInd Bank; BNP Paribas

2 BNP PARIBAS
VIJAY SARATHI, CFA INDUSIND BANK 19 FEBRUARY 2010

FINANCIAL STATEMENTS

IndusInd Bank We expect 24% increase

Profit and Loss (INR m) in NII for FY11driven by
Year Ending Mar 2008A 2009A 2010E 2011E 2012E 26% loan growth
Interest income 18,807 23,095 27,357 34,009 42,365
Interest expense (15,799) (18,504) (18,871) (23,495) (29,005)
Net interest income 3,008 4,590 8,486 10,515 13,360
Net fees & commission 1,890 2,509 3,652 4,625 5,722
Foreign exchange trading income 289 719 815 1,000 1,100
Securities trading income 194 1,215 1,094 1,085 1,606
Dividend income 0 0 0 0 0
Other income 602 120 (116) 120 180 Increasing diversification
Non interest income 2,976 4,563 5,445 6,830 8,608 of fee income streams to
Total income 5,984 9,153 13,931 17,345 21,968 drive growth of 27% for
Staff costs (1,219) (1,871) (2,809) (3,300) (3,830)
FY11
Other operating costs (2,803) (3,599) (4,663) (5,972) (7,467)
Operating costs (4,022) (5,470) (7,472) (9,272) (11,297)
Pre provision operating profit 1,962 3,683 6,459 8,073 10,671
Provisions for bad and doubtful debts (609) (1,253) (1,477) (1,486) (1,547)
Other provisions (210) (155) (213) (420) (538)
Operating profit 1,143 2,275 4,769 6,166 8,586
Recurring non operating income 0 0 0 0 0
Associates 0 0 0 0 0
Goodwill amortization 0 0 0 0 0
Non recurring items 0 0 0 0 0
Profit before tax 1,143 2,275 4,769 6,166 8,586
Tax (392) (792) (1,653) (2,158) (3,005)
Profit after tax 751 1,483 3,116 4,008 5,581
Minority interests 0 0 0 0 0
Preferred dividends 0 0 0 0 0
Other items 0 0 0 0 0
Reported net profit 751 1,483 3,116 4,008 5,581
Non recurring items & goodwill (net) 0 0 0 0 0
Recurring net profit 751 1,483 3,116 4,008 5,581

Per share (INR)

Recurring EPS * 2.35 4.27 8.08 9.38 12.67
Reported EPS 2.35 4.28 8.08 9.38 12.67
DPS 0.60 1.26 1.90 2.35 3.17
Growth
Net interest income (%) 30.1 52.6 84.9 23.9 27.1
Non interest income (%) 4.7 53.3 19.3 25.4 26.0
Pre provision operating profit (%) 14.3 87.7 75.4 25.0 32.2
Operating profit (%) 6.4 99.1 109.6 29.3 39.2
Reported net profit (%) 10.0 97.6 110.1 28.6 39.2
Recurring EPS (%) 1.6 81.9 89.2 16.1 35.0
Reported EPS (%) 1.6 82.4 88.8 16.1 35.0
Income breakdown
Net interest income (%) 50.3 50.2 60.9 60.6 60.8
Net fees &commission (%) 31.6 27.4 26.2 26.7 26.0
Foreign exchange trading income (%) 4.8 7.9 5.9 5.8 5.0
Securities trading income (%) 3.2 13.3 7.9 6.3 7.3
Dividend income (%) 0.0 0.0 0.0 0.0 0.0
Other income (%) 10.1 1.3 (0.8) 0.7 0.8
Operating performance
Gross interest yield (%) 9.74 10.34 9.79 9.71 9.75 We expect continuous
Cost of funds (%) 7.88 8.05 6.83 6.97 6.93 improvement in cost to
Net interest spread (%) 1.86 2.29 2.97 2.75 2.82 income ratio in the next
Net interest margin (%) 1.56 2.06 3.04 3.00 3.07 few years
Cost/income (%) 67.2 59.8 53.6 53.5 51.4
Cost/assets (%) 1.82 2.15 2.40 2.39 2.35
Effective tax rate (%) 34.3 34.8 34.7 35.0 35.0
Dividend payout on recurring profit (%) 25.6 29.5 23.5 25.0 25.0
ROE (%) 6.2 9.8 15.5 14.7 17.0 Adjusted ROE to be
ROE – COE (%) (14.3) (10.7) (5.0) (5.8) (3.6) higher at 16.1% for FY11
ROA (%) 0.34 0.58 1.00 1.03 1.16
RORWA (%) 0.51 0.86 1.51 1.59 1.79
* Pre exceptional, pre-goodwill and fully diluted
Sources: IndusInd Bank; BNP Paribas estimates

3 BNP PARIBAS
VIJAY SARATHI, CFA INDUSIND BANK 19 FEBRUARY 2010

IndusInd Bank
Balance Sheet (INR m)
Year Ending Mar 2008A 2009A 2010E 2011E 2012E
Gross customer loans 128,966 158,465 202,889 255,875 318,229
Total provisions (1,013) (759) (1,589) (2,646) (3,794)
Interest in suspense 0 0 0 0 0
Net customer loans 26% increase in loan
127,953 157,706 201,300 253,230 314,435
Bank loans 6,518 7,329 4,846 10,102 12,618 book for FY11 driven by
Government securities 54,395 62,981 75,276 88,333 113,765 28% growth in corporate
Trading securities 0 0 0 0 0 and commercial loans
Investment securities 11,902 17,853 31,307 35,847 40,865
Cash & equivalents 15,263 11,908 15,294 17,372 22,521
Other interest earning assets 0 0 0 0 0
Tangible fixed assets 6,252 6,232 6,360 6,600 6,900
Associates 0 0 0 0 0
Goodwill 0 0 0 0 0
Other intangible assets 0 0 0 0 0
Other assets 10,337 12,138 13,411 17,400 21,487
Total assets 232,619 276,147 347,795 428,884 532,591
Customer deposits 190,374 221,103 259,832 327,161 421,351
Bank deposits 0 0 0 0 0
Other interest bearing liabilities 19,914 28,170 43,745 43,745 44,945
Non interest bearing liabilities 8,833 10,231 20,687 27,099 31,466
Total liabilities 219,122 259,503 324,264 398,005 497,762
Share capital 3,205 3,563 4,100 4,407 4,407
Reserves 10,292 13,081 19,431 26,473 30,421
Total equity 13,497 16,644 23,531 30,880 34,828
Minority interests 0 0 0 0 0
Total liabilities & equity 232,619 276,147 347,795 428,884 532,591
Supplementary items
Risk weighted assets (RWA) 160,170 186,510 226,040 278,742 346,144 Budgeting 48% increase
Average interest earning assets 193,134 223,319 279,300 350,121 434,597 in gross NPLs for FY11
Average interest bearing liabilities 200,561 229,780 276,425 337,241 418,601
Tier 1 capital 10,730 14,262 21,255 28,604 32,552
Total capital 19,070 23,399 29,618 37,154 42,522
Gross non performing loans (NPL) 3,923 2,550 2,748 3,629 4,820
Per share (INR)
Book value per share 42.20 46.88 57.40 72.27 79.04 Adjusted BVPS for FY11
Tangible book value per share 42.20 46.88 57.40 72.27 79.04 will be INR64.90 after
Growth excluding revaluation
Gross customer loans (%) 15.6 22.9 28.0 26.1 24.4 reserves
Average interest earning assets (%) 13.1 15.6 25.1 25.4 24.1
Total assets (%) 11.2 18.7 25.9 23.3 24.2
Risk weighted assets (%) 17.7 16.4 21.2 23.3 24.2
Customer deposits (%) 7.9 16.1 17.5 25.9 28.8
Leverage & capital measures
Customer loans/deposits (%) 67.2 71.3 77.5 77.4 74.6
Equity/assets (%) 5.8 6.0 6.8 7.2 6.5
Tangible equity/assets (%) 5.8 6.0 6.8 7.2 6.5
RWA/assets (%) 68.9 67.5 65.0 65.0 65.0
Tier 1 CAR (%) 6.7 7.6 9.4 10.3 9.4
Total CAR (%) 11.9 12.5 13.1 13.3 12.3
Asset quality
Change in NPL (%) 14.5 (35.0) 7.7 32.1 32.8
NPL/gross loans (%) 3.0 1.6 1.4 1.4 1.5
Total provisions/gross loans (%) 0.8 0.5 0.8 1.0 1.2
Total provisions/NPL (%) 25.8 29.8 57.8 72.9 78.7
Valuation 2008A 2009A 2010E 2011E 2012E
Recurring P/E (x) * 65.5 36.0 19.0 16.4 12.1
Recurring P/E @ target price (x) * 76.7 42.2 22.3 19.2 14.2
Reported P/E (x) 65.5 35.9 19.0 16.4 12.1
Dividend yield (%) 0.4 0.8 1.2 1.5 2.1
Price/book (x) 3.6 3.3 2.7 2.1 1.9
Price/tangible book (x) 3.6 3.3 2.7 2.1 1.9
Price/tangible book @ target price (x) 4.3 3.8 3.1 2.5 2.3
* Pre exceptional, pre-goodwill and fully diluted
Sources: IndusInd Bank; BNP Paribas estimates

4 BNP PARIBAS
VIJAY SARATHI, CFA INDUSIND BANK 19 FEBRUARY 2010

DISCLAIMERS & DISCLOSURES

ANALYST(S)
Vijay Sarathi, CFA, BNP Paribas Securities India Pvt Ltd, +91 22 6628 2412, vijay.sarathi@asia.bnpparibas.com.
Abhishek Bhattacharya, BNP Paribas Securities India Pvt Ltd, +91 22 6628 2411,
abhishek.bhattacharya@asia.bnpparibas.com.
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Recommendation structure

All share prices are as at market close on 18 February 2010 unless otherwise stated. Stock recommendations are based on absolute
upside (downside), which we define as (target price* - current price) / current price. If the upside is 10% or more, the recommendation is
BUY. If the downside is 10% or more, the recommendation is REDUCE. For stocks where the upside or downside is less than 10%, the
recommendation is HOLD. In addition, we have key buy and key sell lists in each market, which are our most commercial and/or actionable
BUY and REDUCE calls and are limited to at most five key buys and five key sells in each market at any point in time.
Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may
cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.
*In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't
think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ
from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our
assessment of current fair value.
Should you require additional information please contact the relevant BNP Paribas research team or the author(s) of this report.

© 2010 BNP Paribas Group

5 BNP PARIBAS