IndusInd Bank hits 17 month low; Bharat Financial touches 52-week low

IndusInd Bank slipped 5% to Rs 1,376, its lowest level since May 22, 2017, falling 32% from its record high level of Rs 2,038 touched on August 3, 2018.

Shares of IndusInd Bank and Bharat Financial Inclusion have hit their respective 52-week lows on the BSE on Monday in an otherwise firm market.

IndusInd Bank (Rs 1,376) and Bharat Financial Inclusion (Rs 844), down up to 5% each today, corrected 32% from their record high levels of Rs 2,038 and Rs 1,249, respectively, reported on August 3, 2018, on the BSE in intra-day trade. In comparison, the S&P BSE Sensex was up 0.58% or 194 points at 33,543 at 11:00 am, corrected 11% during the same period.

IndusInd Bank hit a 17-month low and was trading at its lowest level since May 22, 2017, while Bharat Financial Inclusion quoting at its lowest level since August 18, 2017, on the BSE.

Shares of IndusInd Bank was under pressure post-September quarter results, falling 17% since October 15, after some broking firms raised concerns over its exposure to the cash-strapped Infrastructure Leasing & Financial Services (IL&FS) Group.

IndusInd Bank has two types of exposures to IL&FS. One is a set of exposures is to SPVs, dominated by one large tunnel project which is completed and tolling. The other one is to the holding company, which will be paid for out of cash flows that will emerge including from the rights issue.

“Though the bank continued to deliver impressive growth on both sides of the balance sheet without diluting on the quality parameters, high provisioning on account of ILFS exposure resulted in depressed profitability and return ratios. The Rs 2.8 billion of provisioning towards the infra group was 1.1% of net worth,” analysts at KRChoksey Shares and Securities said in result update.

“Considering the bank’s exposure to ILFS and the lingering uncertainty around its debt-repaying capability, we have revised our credit costs expectation upwards for FY19. We continue to remain positive on IndusInd Bank, however, exposure to ILFS and the uncertainty regarding the same are seen as key risks,” it added.

“IndusInd Bank’s structural story remains intact with consistent credit growth of +25% and stable asset quality though margin overhang will remain for a while. We have therefore lowered our estimates to account for higher credit cost on account of IL&FS exposure while non-transmission of higher funding cost will keep margins under pressure in the near-term,” analysts at Elara Capital said in a quarterly update.

Regarding the Bharat Financial Inclusion (BFIL) merger, the management stated that they will continue with their business correspondent (BC) arrangements and their existing BCs won’t co-mingle with BFIL. BFIL will be a 100% subsidiary and will also act as their BC. The management explained that any of the BC operating in common geography could acquire a client first. As per the merger agreement — both are scheduled to unite in the next three months — Bharat Financial Inclusion investors would get 639 shares of the bank for every 1,000 shares held.