IndusInd Bank Q4 Review: Analysts Cut Target Price As Recovery Likely To Be Slow
IndusInd Bank Chairman has guided for a more comprehensive review of all discrepancies reported so far.
Most brokerages cut IndusInd Bank's target price as they expect a slow recovery after it reported more than expected loss in the January-March quarter, due to discrepancies and possible frauds. Morgan Stanley, Jefferies, CLSA, HSBC Global Research all cut target price on the stock.
The fourth quarter of financial year 2025 was a large cleanup for IndusInd Bank, Jefferies said. The private lender reported Rs 4,700 crore or 6% of its net worth hit in its profit and loss statement. Growth and profitability will likely slow down in financial year 2026, as the private lender takes its sweet time to recover from these hits, the brokerage said.
HSBC Global Research and Morgan Stanley have downgraded the stock rating to 'reduce' and 'underweight', respectively.
Post discrepancies, IndusInd Bank has 2.2% pre-provision operating profit and 0.5–0.7% return on asset, which placed the private lender to mid-size category, HSBC Global Research said.
How IndusInd Bank regains investors' trust, improves profitability, and beats peers in performance are creating uncertainty over its stability in times ahead, according to the brokerage. HSBC has cut earnings per share estimates to 41% and 43% for FY26 and FY27.
IndusInd Bank on May 15 reported a new discrepancy, which showed that Rs 674 crore was "incorrectly recorded as interest" over three quarters of fiscal 2025. This followed the private lender's first disclosure on March 10 that it had noticed irregularities in its derivative portfolio, which would result in financial impact of 2.35% of net worth as of Dec. 31, 2024.
IndusInd Bank Chairman has guided for a more comprehensive review of all discrepancies reported so far. The return on asset will likely be gradual and there is lack of clarity around management transition, Morgan Stanley said.
Management also said that the slippage in micro finance institutions category will improve in the first half of the ongoing financial year, CLSA said. CLSA cut net profit estimates by 42% and 28% for financial year 2026 and 2027.
IndusInd Bank Q4 Highlights (Consolidated, YoY)
Loss of Rs 2,329 crore versus net profit of Rs 2,349 crore (Bloomberg estimate: Loss of Rs 318 crore).
NII down 43% at Rs 3,048 crore versus Rs 5,376 crore.
Provisions up 165% at Rs 2,522 crore versus Rs 950 crore (Estimate: Rs 3,371 crore).
NIM at 2.25% versus 3.96% (QoQ).
Operating loss at Rs 4,909 crore vs operating profit of Rs 4,082 crore.
GNPA at 3.13% versus 2.25% (QoQ).
NNPA at 0.95% versus 0.68% (QoQ).
IndusInd Bank management indicated it is in advanced stage of appointing chief executive officer, Bernstein noted. The management also promised to start financial year 2026 on a clean slate, which raises hope for it retreat from low valuation multiples.
