IndusInd Bank shares fell nearly 6 percent on Monday, hitting their lowest level since July 2022, after the Reserve Bank of India (RBI) granted only a one-year extension to CEO Sumant Kathpalia, raising concerns over leadership transition and business continuity.
The stock declined 5.94 percent to an intraday low of Rs 881.1 on the NSE, emerging as the biggest loser on the Nifty 50 index.
The RBI’s decision, announced on Friday, was shorter than the three-year term typically granted for such reappointments and the tenure initially approved by the bank’s board. Analysts believe the move adds an element of uncertainty to the bank’s leadership structure while giving it time to address regulatory concerns.
In its latest note, Motilal Oswal said that while the shorter term keeps leadership concerns alive, it provides the lender a window to stabilise operations, strengthen succession planning, and address regulatory gaps without disrupting overall performance.
"Although the RBI has not given any official reason for limiting the extension to one year, we believe concerns over progress on conditions set during the previous extension and issues related to the mismanagement of the microfinance (MFI) portfolio, which led to higher non-performing assets (NPAs), could be key factors," Emkay Research said in a report.
IndusInd Bank, like several other Indian lenders, has been facing stress in its microfinance business, with its gross NPA ratio showing signs of strain.
According to Nuvama, the RBI has favoured external candidates for leadership positions in recent appointments. If this trend continues at IndusInd, it could add to near-term earnings uncertainty, particularly given the already weak outlook for the microfinance segment.
Among internal candidates, Jefferies noted that deputy CEO Arun Khurana could be a strong contender for the top post.
"Until the bank provides clarity on its succession planning and stabilises its MFI and auto loan portfolios, the stock is likely to remain rangebound," Jefferies said.
Following the RBI’s decision, at least six brokerages, including Emkay, lowered their price targets for IndusInd Bank. Data compiled by LSEG showed that the median 12-month target among 38 brokerages has now dropped to Rs 1,210 from Rs 1,280 a month ago.
(With Inputs from Reuters)
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
