INDIAN BANK - A Buy Recommendation

$INDIANB CMP: 636.00 Target Price: 758 Upside: 19% Investment Rationale: Ÿ The business of the bank has increased 8% YoY to Rs 1325294 crore end March 2025, driven by 10% surge in advances to Rs 588140 crore. Deposits rose 7% to Rs 737154 crore at end March 2025. The bank is targeting deposit growth of 8-10% and advances growth of 10- 12% for FY2026. The bank is targeting corporate credit growth of 9%. Ÿ• Advances growth was driven by retail loans rising 14% YoY to Rs 119097 crore at end March 2025, while credit to agriculture increased 14% to Rs 137627 crore and MSME 12% to Rs 94152 crore at end March 2025. The corporate credit has rose 4% to Rs 195407 crore end March 2025. The overseas credit has jumped 18% to Rs 41857 crore end March 2025. Ÿ• The CASA deposits of the bank increased 1% YoY to Rs 282854 crore at end March 2025. The current account deposits increased 2% to Rs 39630 crore, while saving account deposits rose 1% to Rs 243224 crore end March 2025. Ÿ• The bank has posted 6% growth in net interest income (NII), while the core fee income of the bank declined 5% in Q4FY2025 and The Net Interest Margin (NIM) of the bank stood at 3.37% in Q4FY2025. The bank expects net interest margin at 3.15-3.30%, ROA at 1.2% and cost to Income ratio at 55% for FY2025. Ÿ• The bank has continued to improve asset quality in Q4FY2025. The ratio Gross NPA declined to 3.09% as of 31 March 2025 as against 3.95% as on 31 March 2024. Valuation The bank has been consistently delivering on improving asset quality, cost efficiency, other income and productivity in the past few quarters. Its proactive tech integration ensured a smooth transition. It is one of the best mid-cap PSBs with strong capital ratios across cycles and ability to deliver relatively stronger return ratios as growth accelerates. Thus, it is expected that the stock may see a price target of Rs.758 in 8 to 10 months’ time frame on a current P/BV of 1.38x and FY26 (E) BVPS of Rs. 549.17.