IndusInd Bank shares surged 7 percent on Wednesday despite reporting weak results for the June quarter as brokerages maintained bullish view on the stock. Global brokerage house CLSA raised the target price for the stock while Nomura has a 'buy' call on the lender post the results. The stock has risen 14 percent in the last month, becoming the top gainer on the Nifty Bank index but has lost over 63 percent in 2020 so far.

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The bank registered a 67.8 percent (year-on-year) decline in Q1FY21 net profit to Rs 460.64 crore on the back of a five-fold increase in provisions for bad loans. Profit in the corresponding period last fiscal came in at Rs 1,432.5 crore.

Provisions and contingencies shot up significantly to Rs 2,258.9 crore in the quarter ended June 2020 largely due to COVID-19 related provisions, rising five-fold over Rs 430.6 crore reported in the year-ago period. However, the same declined by 7.4 percent quarter-on-quarter.

The bank also announced that its board approved a Rs 3,288-crore fundraising plan through a preferential issue. Under the proposed issue, the bank will allot 6.275 crore equity shares at a price of Rs 524 per share to a set of marquee investors and the promoters, subject to shareholders and other necessary approvals.

However, despite the poor earnings this season, Nomura said that the bank's operational performance was weak but the decline in moratorium and collection efficiency at over 80 percent for MFIs and 75 percent for CV indicates a strong recovery. It added that Yes Bank led liability risks are behind the bank now, with deposits stabilizing. Deposits grew 5 percent QoQ led by a 5 percent growth in term deposits

On fundraising plan, Nomura said that the bank’s capital position will be strengthened with the capital infusion leading to an improvement in CET-1 ratio to 14.5 percent. The current valuation is also undemanding, it added. The brokerage has a target price of Rs 650 for the stock.

Meanwhile, CLSA raised the stock's target price to Rs 665 per share from Rs 600 earlier.

"The 1QFY21 highlight was that the lender ticked many of the right boxes with a capital raise of Rs 3,300 crore, stability in deposits, disclosure on its BBB book and moratorium book. High exposure to business owners and continued stress in its corporate book restricts us from reducing our credit cost estimates materially, but 1QFY21 does address the concern over the stability of the bank. We factor in the capital raise and expect an ROE of 14 percent," the brokerage stated in its review report.