IndusInd Bank Ltd. stock received another large target price cut, this time from CLSA, on lingering uncertainty over management continuity and persistent investor pessimism.
IndusInd Bank Ltd. stock received another large target price cut, this time from CLSA, on lingering uncertainty over management continuity and persistent investor pessimism.
Analysts at the brokerage drew parallels from similar events at other banks — RBL Bank Ltd. and Yes Bank Ltd.
It cited the case of RBL Bank when the stock crashed 60% after the Reserve Bank of India gave a one-year extension to the managing director and later appointed a PSU banker in 2021.
"The street feared there would be skeletons in the closet, however, over the ensuing quarters nothing emerged and the stock recovered its losses," a note said.
"The RBI's one-year extension to IIB's MD is similar to what it did for RBL Bank in 2021. However, in Yes Bank's case, the RBI abruptly terminated the MD's tenure within three-four months of its announcement. In both cases, the stocks recovered after some time," it said.
If a PSU banker is appointed as IndusInd Bank CEO after Sumant Kathpalia's tenure finishes, there would be even more negative sentiment for the stock, according to CLSA.
Moreover, the potential invoking of the promoter's stock pledge by its lenders would add to the uncertainty.
CLSA reduced IndusInd Bank's target price from Rs 1,300 to Rs 900 but maintained an 'outperform' rating.
Some Scope
Its not all negative for the Mumbai-based lender. If IndusInd Bank delivers earnings broadly in line with expectations over the next four to six quarters, investor concerns will subside, the brokerage said.
Two key positives for the bank in the near term are the expected recovery in microfinance and improved margins, due to better liquidity in the banking system and potential interest rate cuts.
A non-fundamental positive could emerge if the promoter receives RBI approval to increase its stake in the bank, following the acquisition of Reliance Capital. Such a development would likely boost investor confidence, as any stake purchase by the promoter would be viewed as a vote of confidence in the bank's future prospects, the note said.
Battered for five consecutive days, IndusInd Bank stock managed to claw back on Wednesday, as investors bought shares after a 33% drop over the past week. The share price ended 4.38% higher at Rs 684.7, compared to a 0.12% decline in the Nifty 50.
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