Indian Bank Share Price Target at Rs 675: Emkay Global Research
Emkay Global Financial Services has reaffirmed its BUY rating on Indian Bank (INBK) with a 12-month target price of Rs 675, signaling 6.5% upside from current levels. This state-owned lender emerges as a rare combination of defensive positioning and offensive capabilities, boasting industry-leading asset quality (NNPA 0.2%), a 53% MCLR-linked loan book to weather rate cuts, and a roadmap for sustained 1.1-1.3% RoA through FY28. While guiding modest 10-12% credit growth, management prioritizes profitability levers: expanding SME/mid-corporate lending (45% portfolio), optimizing gold loan exposure amid regulatory changes, and harnessing Rs 20B recovery pipeline. The bank’s 94% PCR and CAR at 17.9% create fortress-like buffers as sector faces CASA depletion challenges until FY27.
Fortress Balance Sheet Meets Strategic Repositioning
Asset quality supremacy remains Indian Bank’s crown jewel – its 0.2% NNPA ratio outshines even private peers, supported by:
- Rs 5.5-6B recovery pipeline including Rs 20B from AUCA assets
- 94% provision coverage ratio (industry-high)
- Slippage containment below 1% through tight monitoring
The Supreme Court’s stay on Bhushan Power liquidation further de-risks the story, while management’s decision to retain Rs 4.9B provision buffer provides ammunition for sub-1% credit costs.
The Margin Preservation Playbook
With 53% MCLR-linked loans versus industry average of 35-40%, Indian Bank is uniquely positioned to limit NIM compression to 20-30 bps through FY28 vs 40-50 bps for peers. Management’s three-pronged approach:
| Strategy | FY26 Impact | FY28 Outlook |
|---|---|---|
| Mid-Corp/SME mix increase | +15 bps yield | 45% portfolio share |
| Gold loan recalibration | -2% growth impact | PSL optimization |
| CASA revival roadmap | 38% ratio | 40% by FY28 |
Growth Metrics: Quality Over Quantity
While guiding conservative 10-12% credit growth, management focuses on profitable accretion:
- Deposit growth targeted at 8-10% to improve LDR to 79%
- Corporate book shifting to working capital loans (70% share)
- Retail focus on secured products: mortgages (9% growth), gold loans (15%)
Valuation Matrix: Undemanding Multiples Signal Opportunity
Indian Bank trades at compelling 1.2x FY27 P/ABV versus 1.5x for PSB peers:
| Metric | FY26E | FY28E | Peer Avg |
|---|---|---|---|
| RoE | 17.3% | 14.5% | 12-13% |
| P/E | 7.2x | 6.7x | 9.5x |
| Dividend Yield | 2.8% | 3.1% | 2.2% |
Technical Setup: Breaking Out of Consolidation
The stock recently breached its 200-DMA at Rs 615 with:
- RSI(14) at 68 and rising
- MACD crossover above signal line
- Volume surge to 2M shares/day
Key levels:
- Support: Rs 615 (200-DMA), Rs 580 (100-WMA)
- Resistance: Rs 659 (52-week high), Rs 710 (161.8% Fib)
Risks: Regulatory Headwinds and Rate Cycle
Gold loan regulations pose near-term challenges – RBI’s LTV cap (75%) and collateral restrictions for sub-Rs 0.2M loans could:
- Trim gold loan growth by 200-300 bps
- Impact PSL achievement by 5-7%
- Compress fees income by Rs 1.2-1.5B annually
However, management’s DFS-backed push for phased implementation (post-Jan 2026) provides breathing room.
Bottomline for Investors: Safe Investment with Limited Upside
With 19% total return potential (6.5% price upside + 12.5% dividend yield), Indian Bank offers defensive alpha in volatile markets. The Rs 675 target implies 1.1x FY27 ABV – conservative given sector rerating potential. Accumulate on dips to Rs 625-635 zone for optimal risk-reward.
