IndusInd Bank - The Winning Troika; Visit Note :: Edelweiss

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IndusInd Bank`s (IIB) top management, during our recent interaction, delineated the `3D` strategy the bank is following to rejuvenate business model and `double the bank`: (i) Domination-in vehicle financing and home markets (target ~5% share in branches and CASA); (ii) Diversification-building universality to bring full suite of products and acquire new relationships; and (iii) Differentiation-digitisation, market segmentation and building product/sector specialization within the corporate segment. Product specialization also includes strengthening of investment banking franchise and plans to further ramp up non-fund exposure and garner higher fees (to mimic foreign banks). These strategies will propel RoA led by sustaining asset growth, improving CASA, garnering higher fees and containing cost/income near 45%. Maintain `BUY` with target price of INR 900 (3.25x FY17E book).

Selective dominance: The key mantra

In line with its Phase III game plan, IIB has a well thought out strategy of selective dominance in home markets. The modus operandi is to build infrastructure, akin to larger banks, and capture a sizeable pie in these towns (12 home markets identified; 6 more on the radar over next 1 year) armed with its entire product bouquet.

Differentiation: Digitisation, segmentation and specialization

`Responsive Innovation` supported by digitisation is core to IIB`s DNA; it has spearheaded various industry first client-centric innovations leveraging technology. It is also following a differentiated approach in segmenting its pan-India presence with distinct strategies for each market. Product specialisation will be fee income accretive as it will further shore up non-fund based exposure following example of foreign banks.

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https://www.edelweiss.in/research/IndusInd-Bank--The-Winning-Troika;-Visit-Note/27930.html