IndusInd Bank Shares May Drop as RBI Approves CEO Term for Just One Year
IndusInd Bank shares have been on a downward trend, falling 12% in the last month and 35% over the past six months. The stock has been under pressure due to concerns related to microfinance institutions (MFI) and uncertainty over CEO Sumant Kathpalia’s reappointment.
Recently, the Reserve Bank of India (RBI) extended Kathpalia’s term for just one year instead of the board’s requested three-year term. Analysts at Nuvama Institutional Equities see this as a negative development, indicating that the bank might transition to a new CEO soon. Adding to the instability, the bank’s Chief Financial Officer (CFO) resigned just before its Q3FY25 earnings report.
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Potential Leadership Change & Market Impact
Given RBI’s preference for external candidates in recent CEO appointments, analysts believe IndusInd Bank could get an outsider as its next leader. This increases uncertainty in leadership, which, combined with an already weak MFI cycle, impacts near-term earnings visibility.
Nuvama stated that despite a sharp correction in share price, the stock may remain under pressure due to low earnings visibility, a likely weak Q4FY25, and leadership uncertainty.
Brokerage Predictions & Stock Outlook
Motilal Oswal Financial Services (MOFSL) has reduced its earnings estimates for IndusInd Bank by 9% for FY26 and 10% for FY27. The bank is expected to deliver a return on assets (RoA) of 1.3% in FY26 and 1.4% in FY27.
MOFSL believes that despite near-term challenges, IndusInd Bank’s current valuation is attractive, particularly as operations are expected to improve in FY26. The brokerage has maintained a “Buy” rating with a revised target price of Rs.1,100.
Stock Performance Trends & Future Risks
The bank’s performance has been affected by multiple factors, including slow loan growth, high provisions, and weak margins. These issues, along with speculation about CEO succession, have contributed to a 39.4% stock decline this financial year.
Q4FY25 earnings are expected to remain soft due to ongoing MFI challenges and potential contingency provisions. Additionally, the last major promoter share pledge was in December 2024, when the stock traded at Rs.930.
Possible Stake Sale & Complications
A media report suggested that Nippon Life Insurance might acquire a 9.9% stake in IndusInd Bank. However, Nuvama views this deal as complicated.
Two years ago, IndusInd Bank’s promoters, the Hinduja Group, sought RBI approval to increase their stake in the bank, but the request is still pending. The same promoters are set to take ownership of Reliance Capital, which holds Nippon Life Insurance. Given regulatory complexities and common ownership concerns, Nuvama believes the deal may face hurdles.
IndusInd Bank faces near-term stock pressure due to leadership uncertainty, weak earnings expectations, and regulatory challenges. While analysts see long-term potential, investors should brace for volatility in the coming months.
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