Microfinance institutions in India are at an inflection point and the best way to play this is through Bandhan Bank, IndusInd Bank and L&T Finance, said global investment firm Goldman Sachs on Tuesday. With all three stocks trading at a discount of anywhere between 45 percent and 50 percent versus the 10-year averages, Goldman Sachs believes that the market is not pricing in any growth or any improvement in the return on assets (RoAs) for all these three companies.
In fact, Goldman expects the second half of FY22 to be strong in terms of improving loan demand as well as most of the provisions for bad loans are provided for and they are behind most of these companies.
On Bandhan Bank, Goldman Sachs has a buy rating with a target price of Rs 390. The brokerage firm expects Bandhan Bank to deliver best-in-class return on equities (RoEs) over the next three years.
On IndusInd Bank, Goldman Sachs has a buy rating with a target price of Rs 1,187. The global brokerage expects the bank to deliver pre-provision operating profit (PPoP) growth of a 19 percent compounded annual growth rate (CAGR) over the next three years and with a healthy RoA of 1.7 percent and RoE of over 15 percent over the next three years.
On L&T Finance, Goldman has a buy rating with a target price of Rs 100 and expects a PPoP growth of over 18 percent CAGR over the next three years with a healthy RoA of 2.7 percent and maintaining an RoE of over 13 percent.
Watch the accompanying video of CNBC-TV18’s Nimesh Shah for more details.
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