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MOSL: Morning India (10/January/19): 1. IndusInd Bank (IL&FS exposure an overhang; Negligible divergence provides comfort); 2. Delta Corp; 3. Fuel or Engines (Financing of investments — the key constraint to hi

MOrning India (10/January/19): 1. IndusInd Bank (IL&FS exposure an overhang; Negligible divergence provides comfort); 2. Delta Corp; 3. Fuel or Engines (Financing of investments — the key constraint to higher growth)

 

Today’s top research idea

IndusInd Bank: IL&FS exposure an overhang; Negligible divergence provides comfort

• Strong core profitability, improving CASA ratio, healthy return ratios and capitalization (Tier 1 ratio of ~13.8%) are key positives. We expect IIB to report strong ~31%+ loan CAGR over FY18-FY21E driven by multi products, new product addition and market share gains.
• Overall, we expect underlying growth in the consumer finance division to show continued revival with broad-based growth in vehicle finance division and new product additions. IIB is already witnessing healthy growth in credit cards. Corporate loan growth is likely to be opportunistic (based on spreads available).
• IIB continued to make contingent provisions towards the infra group and has indicated a potential coverage of 40-50% on this account (holding company exposure). This will keep provisioning expenses elevated in the near term. Merger with BHAFIN will strengthen earnings profile and further boost return ratios.

Piping hot news

World Bank pegs India’s fiscal 2019 growth at 7.3%

• The World Bank on Wednesday kept India’s growth projection unchanged at 7.3% for 2018-19 and 7.5% in 2019-20 even as it warned that if a trade war between the US and China leads to a global slowdown, the spillover effects on emerging market and developing economies (EMDEs) could be profound. This comes in the wake of the Central Statistics Office on Monday projecting the Indian economy to grow at 7.2% in 2018-19 against 6.7% a year ago.