IndusInd Bank Stock Falls After CEO's Shorter Tenure Extension

IndusInd Bank Ltd.'s share price fell nearly 6% during early trade on Monday to multi-year lows, after the Reserve Bank of India extended the tenure of Sumant Kathpalia as managing director and chief executive officer for a shorter term.

The banking regulator on Friday approved the re-appointment of Kathpalia as managing director and CEO of the bank for one year, with effect from March 24, 2025 till March 23, 2026.

IndusInd Bank had sought approval for his position for a period of three years. This is the second time that the RBI has approved his extension by a shorter term than what was sought. In 2023, the regulator cleared only a two-year term for Kathpalia.

The RBI's move disappointed street expectations, with analysts saying a shorter tenure extension will increase governance and other concerns for the lender and act as an overhang on the stock.

While brokerages maintained a largely bullish rating on the stock, they flagged management transition and continuity as key concerns.

An extension of only one year appears to signal RBI’s continued discomfort or lack of full confidence, especially when other banks’ MD and CEOs have been reappointed for three years, Citi said in a note.

Analysts at Bernstein see the IndusInd Bank stock unlikely to face re-rating till a CEO with a three-year term is appointed.

IndusInd Bank share price declined 5.94% intraday to Rs 881.1 apiece, the lowest since July 22, 2022. The scrip was trading 2.87% lower by 9:31 a.m. The benchmark NSE Nifty 50 was up 0.24%.

The stock has fallen 42% in the last 12 months and 5.6% on a year-to-date basis. Total traded volume so far in the day stood at 14 times its 30-day average. The relative strength index was at 37.

Thirty out of 49 analysts tracking IndusInd Bank have a 'buy' rating on the stock, 15 recommend a 'hold' and four suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price target of Rs 1,154 implies a potential upside of 29%.