Sharekhan's research report on IndusInd Bank
The bank’s internal review estimates a 2.4% hit to net worth (Rs. 1,520 crore post-tax), expected to be accounted for in Q4FY25. An external agency has been appointed to validate internal findings, but repeated risk management lapses raise concerns over internal processes and regulatory scrutiny. Despite cheap valuations (0.7x FY26E BV), uncertainty around management stability, potential regulatory interventions, and muted earnings visibility make it difficult to build a strong investment case. Key turnaround catalysts: (a) No further adverse impact from the external audit, (b) Stronger internal controls, accountability, and corrective actions, (c) No additional RBI intervention, (d) Hiring an experienced external CEO (preferably private sector), (e) Earnings recovery via asset quality improvement in MFI/unsecured retail, (f) Promoter stake increase post regulatory approval.
Outlook
We downgrade the stock from Buy to Hold with a revised PT. of Rs. 750. A series of negative surprises, including the CFO’s resignation, the CEO’s shorter tenure extension by the RBI, and a potential derivative portfolio loss, has driven our downgrade.
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