Laggard To Leader

17 Nov,2012 09:50 IST

Laggard To Leader

Thanks to innovative plans, the 1993 vintage bank is on the comeback trail

Raghu Mohan


We are what we repeatedly do, said aristotle. in 2009-10, IndusInd Bank’s promoters, the Hindujas, woke up to the fact that the bank had nothing to show after 17 years of being in the business. Romesh Sobti and his A-team from ABN Amro Bank were roped in to give effect to wholesale changes at the bank. One does not know if Sobti, managing director and CEO, read out Aristotle to IndusInd’s employees, but the bank has turned out to be a repeat winner — the fastest growing mid-size bank this year on the back of being named the best mid-size bank in 2011.

The key inflection points in IndusInd’s growth story were two qualified institutional placements — for Rs 480 crore (2009-10) and Rs 1,173 crore (2010-11). They gave the bank ballast. The bank’s loan book rose from Rs 15,771 crore (2008-09) to Rs 20,551 crore (2009-10); and to Rs 26,166 crore (2010-11) and further to Rs 35,064 crore in end-March 2012 — a growth of over 50 per cent (year on year) since 2008-09.

Consumer finance accounted for 49 per cent of the book at Rs 17,237 crore in 2011-12; the rest was taken up by wholesale commercial banking (Rs 17,827 crore). Within these two halves, commercial vehicle loans stood at Rs 8,263 crore and those to large corporates at Rs 9,502 crore.

It has been a comeback like no other. IndusInd was the laggard among banks of its vintage; it is the only non-institution promoter bank left from the batch of 1993 when the first set of 10 private bank licences were issued. In a draft paper on the desirability of new banking licences in 2010, the RBI referred to it (without naming it), albeit in a disparaging manner: “One bank has just about survived”.

Forget the biggies from 1993 such as HDFC Bank, ICICI Bank and Axis Bank, which are now large banks (balance sheet size above Rs 150,000 crore in our survey), even relatively new entrants (2003) such as Kotak Mahindra Bank and Yes Bank have made a mark — both are now mid-sized banks (between Rs 50,000 crore and Rs 150,000 crore) like IndusInd. It speaks volumes about the bank’s lost years.

Cut to the present. “Fiscal 2011-12 has been a year of challenges. The  (operating) environment saw significant turbulence with worsening liquidity conditions, inflationary pressures coupled with volatility in currency exchange rates and persistently rising crude oil prices,” says Sobti. To its credit, the bank grew in difficult times. Its loan book improved with a fall in net non-performing assets to 0.27 per cent (0.28 per cent in 2010-11); it was 0.50 per cent in 2009-10. The bourses have taken note. The earnings per share in end-March 2012 stood at Rs 19.20 (Rs 13.16), and more than doubled from the Rs 9.01 in 2009-10.

The bank’s desire to unleash the animal within was on show last year. It decided to improve branch service standards with its 3-6-3 campaign across metros; the campaign was meant to better standards of branches on three vectors in six cities over three months. “Internally, the campaign generated a competitive focus on delivering service, with each branch vying to win the monthly award and individuals aiming to become employees of the fortnight or monthly service awardees,” says Sobti.

(This story was published in Businessworld Issue Dated 26-11-2012)

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