Despite the massive turmoil seen in IndusInd Bank shares, following the discrepancies noted in the private lender's derivatives portfolio, international brokerage CLSA has maintained its outperform rating on the stock.
However, the brokerage did cut its target price on IndusInd Bank shares to Rs 900, down from Rs 1,300 earlier. This implied an upside of around 31 percent from the previous session's closing price.
From its 52-week high, shares of the lender have collapsed over 60 percent. "The past few days for IndusInd Bank have been tumultuous noted the bank, especially with a one-year extension for the MD," said CLSA.
As a result, investors naturally fear that more issues will arise. Over the next few quarters, there will be lingering uncertainty over more skeletons in the closet and management continuity.
At 9.20 am, shares of the bank were quoting Rs 696.3, higher by 1.7 percent on the NSE.
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The CEO got a one year extension for his term from the Reserve Bank of India, instead of the three years applied for. "The RBI maybe uncomfortable with my leadership skills", IndusInd Bank chief executive officer Sumant Kathpalia said during an analyst call after the Reserve Bank of India approved only a year’s extension to his tenure. The board had approved a three-year extension for Kathpalia.
Therefore, following the end of his tenure, if a PSU banker is appointed at the helm of the bank, CLSA noted that it might lead to further negative sentiment.
Given the rapid fall in IndusInd Bank's share price, if lenders invoke the promoter's stock pledge, it would add uncertainty to the stock. However, over time, CLSA believes that the bank's fundamentals will take over.
There are two fundamental positives for the bank in the near time. The first, is a recovery in the beleaguered microfinance sector. The second is the respite for banking margins from better banking system liquidity and the RBI's monetary policy easing cycle.
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