Reduce IndusInd Bank; target of Rs 850: ICICI Securities

ICICI Securities research report on IndusInd Bank

IndusInd Bank (IIB) has communicated a preliminary one-time hit of ~2.35% of net-worth on its derivative portfolio. We peg the pre-tax hit at ~INR 20bn–21bn. IIB mentioned that these derivative positions pertain to foreign currency deposits/borrowings conversion and not to any client/industry exposure. Since 1 Apr’24, the bank has stopped internal hedging, post which, around Sep’24, it identified the discrepancies. The hit is likely to be routed through P&L in Q4FY25, which in our view, could severely dent reported profitability; may even report a loss in Q4FY25. We recently downgraded the stock to REDUCE (link here) on the curtailed term extension of the incumbent MD & CEO. We believe the discrepancies reflect poorly on internal control. Maintain REDUCE.

Outlook

We maintain our recently downgraded rating on IIB at REDUCE. Our TP of INR 850 remains unchanged, valuing the stock at ~0.9x FY26E ABV.