IndusInd Bank Stock Downgraded To 'Reduce' By ICICI Securities, Lowers Target Price — Here's Why

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ICICI Securities Report

As opposed to the three-year term requested by IndusInd BankLtd.’s board for its incumbent MD and CEO, Mr Sumant Kathpalia, Reserve Bank of India has approved a term renewal for only one year. This is the second consecutive instance, when Mr Kathpalia has been denied full term by RBI.

We believe this may lead to deliberation on how the regulator could be construing individual capability/suitability or governance of the institution, or both.

We believe the board could begin considering an MD & CEO succession plan, which may include external candidates as well.

We see heightened uncertainty in the near term on possible kitchen sinking, and probable names of MD&CEO candidate. We downgrade IndusInd Bank to Reduce (from Buy) with a revised target price of Rs 850 (Rs 1,350), valuing the stock at ~0.9x FY26E adjusted book value.

Risks: Better-than-expected growth; and seamless management transition.

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