IndusInd Bank: The high cost of cheap valuation

IndusInd Bank 's rise looked like a rare success story—steady growth, impressive profits, and solid fundamentals that few banks could match. It was the kind of investment opportunity many dreamed of: strong performance combined with an attractive price tag. Yet, beneath this polished facade lurked hidden cracks that few spotted in time. What seemed like a straightforward, safe bet turned into a complex puzzle—one that unravelled investor trust and exposed the risks of banking's often opaque world. Quality, growth, and profitability For five years, IndusInd Bank demonstrated what appeared to be rock-solid fundamentals . Its Non-Performing Assets (NPAs) remained relatively stable, and its Capital Adequacy Ratio (CAR) consistently exceeded regulatory requirements, signalling a well-capitalised institution with sound asset quality. The bank's loan book expanded healthily year after year, and net profit showed a steady upward trend. Profitability metrics were respectable, with the bank's Return on Assets (ROA) hovering around 1.5 per cent and Return on Equity (ROE) near 15 per cent, both indicators of efficient use of capital and assets. These numbers positioned IndusInd as a well-run and profitable bank. Everything looks good, but is it really? IndusInd's numbers remain impressive during last 5 years Metric FY20-24 5Y loan book growth (% pa) 13.0 5Y median net interest margin (%) 4.1 5Y median ROE (%) 14.5 5Y median ROA (%) 1.5 5Y median GNPA ratio (%) 2.3 5Y