India: Indusind Bank, HDFC Limited, Somany Ceramics and more

• Bank claimed  “procedural lapse” whereby the bank received repayments of large numbers of loans, and disbursed new loans to the same accounts, on the same day, and in cash.
• Earlier CEO stated that the bank during Covid had an approved loan product which facilitated same day repayments of earlier and disbursal of new loans 
• Regulator and the board of directors needs to probe whether this was a “procedural lapse” or a management policy and fix accountability of senior management.

• HDFC Ltd (HDFC.IN) [HDFC] reported FY 3Q22 results of INR 30.5 bn, decreasing INR 6.2 bn (16.9%) linked quarter basis reflecting a lack of dividends received;
• Given the INR 4.2 bn in NCO during FY 3Q22, net new NPLs increased INR 11.7 bn or 23.3% on an annualized basis; and
• We also find that HDFC’s reserve still needs shoring up by another INR 185 bn or over a year of PBT.  

However, EBITDA fell 2% YoY, owing to the elevated gas price impact. The company continues to keep a tight leash on its debtors. Timely capacity expansion in Q4FY22 should bolster its volume and market share growth. We maintain BUY on Somany Ceramics with an unchanged target price of INR 1,130/share (13x Dec-23E consolidated EBITDA). We continue to like SOMC for its strong retail distribution, improving product mix, and tightened working capital (WC).