The Indus Swells
It is now well established that when you speak about the marquee private banks in the country, IndusInd Bank is there up among the best in class. It is a remarkable achievement given that the first decade of its existence can well be called the “lost years” — the bank muddled its way until its promoters, the Hindujas, buzzed Romesh Sobti, then head of ABN Amro Bank in India in late 2009 to set things right. For the last few years, the bank has graced the podium in the BW Businessworld Best Banks’ Surveys with the knowledge support of PwC; in the 10th edition, it is again been judged the ‘Best Mid-sized Bank’.
Fiscal 2017 was an extraordinary year — demonetisation (and later the Goods and Services Tax/GST) saw the management bandwidth of banks being taken up by logistics on both accounts; add on the state of the credit markets, it is a wonder that IndusInd still managed to keep the metal pressed to the floor.
Just look at the numbers. Advances at end-March 2017 stood at Rs 1,13,081 crore, up by 29 per cent; deposits were at Rs 1,26,572 crore, up by 36 per cent. Net interest income grew 34 per cent to Rs 6,062.60 crore. Non-interest income was up 27 per cent at Rs 4,171.49 crore with core fee-income up by 24 per cent at Rs 3,488.59 crore; operating profit rose 32 per cent to Rs 5,451.01 crore; net profit came in at Rs 2,867.89 crore, up by 25 per cent.
Breaking It Up Bite-size
Ever since Sobti came on board, the bank has worked on three-year planning cycles (PC); it is now into its fifth, and the ambitions are big. Its ‘4D’ strategy for the period (fiscal 2018-20) is as follows — digitise to differentiate, diversify, and maintain domain leadership. “It will double the bank in terms of clients, loans and profits,” says Sobti.
IndusInd is at an inflection point. It means an annual loan book growth of 25-30 per cent (or the run-rate of HDFC Bank when it was relatively smaller), a current and savings account ratio of 40 per cent, a branch network of 2,000 and a doubling of customers to 20 million. The focus of the management will be on proven verticals — vehicle finance, non-vehicle retail products, microfinance, investment banking (which it rolled out sometime ago) and treasury; the “manufacture versus distribute” aspect when it comes to insurance and wealth management; consumer digital lending and affordable housing; and, of course, cross-sell, which is gaining importance given the premium on capital and the costs involved in acquiring the incremental customer.
You can bet your bottom rupee that the path outlined in the banks’ ‘4D’ journey will involve the inorganic.
In October 2017, the bank picked up microfinance lender Bharat Financial Inclusion (BFIL). The deal is to add Rs 10,000 crore by way of heft to the bank’s existing microfinance book of Rs 3,000 crore. “We have a deep belief (of both the institutions) in the power of livelihood loans,” says Sobti.
Acquisitions such as BFIL make it to the headlines; what goes below the radar is the cherry-picking of portfolios, which the bank has done over time.
In fiscal 2016, it gobbled the diamond and jewellery financing business and related deposit portfolio of Royal Bank of Scotland in India. The acquisition made a strategic fit as IndusInd specialises in the trade and the deal enhanced its position. In the summer of 2011, it picked up the local plastic business of Deutsche Bank for Rs 224 crore. In one fell swoop, the buyout gave IndusInd access to nearly 200,000 card holders.
The Indus is now in full flow.
