Motilal Oswal Stays 'Neutral' On IndusInd Bank — Here's Why

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Motilal Oswal Report

IndusInd Bank Ltd. has witnessed a steep decline in operating performance due to asset quality issues and accounting discrepancies. While the bank has recognized the due impact from these abnormalities, near-term pressure on margins and elevated provisioning are likely to continue suppressing RoA recovery in the near term.

The bank also utilized its contingent buffer during Q4 FY25, while the upcoming implementation of ECL could add to credit cost pressures in the coming years.

On a positive note, the names of three seasoned private sector bankers have been submitted to the RBI for consideration.

Clarity on the appointment of the new CEO and the strategic direction under their leadership will be key to providing better visibility on the bank’s growth outlook and overall strategy.

Given ongoing uncertainties and continued softness in operating performance, we reiterate our Neutral rating. However, we take off the bear case multiples previously attributed to the stock due to heightened irregularities and lack of confidence in the reported numbers, even as our earnings estimates broadly remain unchanged.

We revise our target price to Rs 800 (vs Rs 650 earlier) based on 0.9x FY27E adjusted book value.

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