IndusInd Bank shares fell 5% after the Reserve Bank of India (RBI) approved the reappointment of CEO Sumant Kathpalia for only one year. This has raised concerns over leadership stability, prompting brokerages to revise their outlook on the stock.
Brokerages' Views on IndusInd Bank
Nuvama: Maintain Hold, Target Price ₹1,115
- IndusInd Bank is likely to take a year to transition to a new CEO.
- RBI’s preference for external candidates increases the likelihood of an outsider taking charge.
- Near-term earnings visibility is weak due to a sluggish microfinance institution (MFI) cycle.
IIFL: Maintain Add, Cut Target Price to ₹910 (from ₹970)
- Estimates remain unchanged, but the price-to-book (P/B) ratio target has been lowered to 0.9x from 0.95x.
- RBI’s decision to approve the CEO’s reappointment for just one year creates leadership uncertainty.
- Past cases of similar short-term extensions at RBL, Bandhan, and Federal Bank have led to negative stock reactions.
Axis Capital: Maintain Buy, Target Price ₹937
- The CEO’s short tenure remains a key overhang.
- IndusInd Bank’s stock has dropped 34% in the last six months, compared to a 5.5% correction in Nifty Bank.
- The stock is currently trading at 0.9x FY27 P/Adjusted Book Ratio.
Jefferies: Retain Buy, Lower Target Price to ₹1,080 (from ₹1,200)
- A shorter CEO extension could lead to uncertainty over succession.
- Historical cases (Federal Bank, Kotak Bank, RBL, and Bandhan Bank) show stocks reacting negatively (3-18% drop) to similar situations.
- Over 3-6 months, stock performance is expected to be driven more by business conditions than leadership changes.
- Improvement in the MFI and auto segments is key for earnings growth.
Elara: Revise to Accumulate from Buy, Lower Target Price to ₹1,050 (from ₹1,320)
- CEO reappointment for only one year raises leadership concerns.
- CFO exit and other leadership attrition add to strategic uncertainty.
- The stock has declined 30% in six months and is trading at 0.85x FY27E P/BV, which could present a buying opportunity.
- A further correction is expected in the near term, but long-term valuation versus franchise value suggests a favorable risk-reward tradeoff.
Market Outlook
The uncertainty surrounding IndusInd Bank’s leadership transition has led to a sharp decline in stock price. While some brokerages see long-term value, concerns over management stability persist. Investors will closely monitor further developments in CEO succession and overall business performance.
Disclaimer
This article is for informational purposes only and should not be considered financial advice. Investors are advised to conduct their own research or consult with a financial expert before making investment decisions.