Shares of IndusInd Bank Ltd rose 2 per cent in Tuesday's trade and were up for the second straight session, as credit rating agency Moody’s affirmed its 'Ba1' long-term foreign and local currency deposit and issuer ratings for IndusInd Bank suggesting a stable outlook. That said, it placed its 'ba1' baseline Credit Assessment (BCA) and adjusted BCA under review for a potential downgrade.
The stock rose 1.55 per cent to hit a high of Rs 687.45. It, however, cut gains and was trading at Rs 679.25, up 0.34 per cent. The scrip is down 31.22 per cent in the past two weeks.
Moody's comments came after the Reserve Bank of India (RBI) said the private lender's financial health remained stable and was being monitored closely, adding there was no need for depositors to react to the speculative reports.
IndusInd Bank has declared a preliminary impact of 2.4 per cent of its net worth due to a change in the valuation of derivatives transactions. Stock analysts noted the adjustment would be required, which would even lead to losses for the private lender in the March quarter, but the bank insisted the Q4 may still deliver profits.
Moody's noted that the impact of the derivatives transactions, coupled with the prevailing stress in the retail unsecured loans, could hit the bank's profitability, capital and funding, potentially leading to a downgrade of the BCA.
The stock recently recovered, as CEO Sumant Kathpalia said that his bank was looking to offset the losses, arising due to accounting discrepancy in valuations of past derivatives transactions, within the March quarter itself. He suggested that the fourth quarter as well as the full year will likely have profit figures. The RBI recently extended Kathpalia's tenure as CEO by one year only against three years sought by the bank.
"Basis the disclosures available in public domain, the bank has already engaged an external audit team to comprehensively review their current systems, and to assess and account for the actual impact expeditiously. The Board and the management have been directed by Reserve Bank to have the remedial action completed fully during the current quarter viz., Q4FY25, after making required disclosures to all stakeholders," RBI said in a statement on March 15.
Emkay Global recently said that it was finding it embarrassing that IndusInd Bank was in its model portfolio and that a top pick for 2025. The domestic brokerage said it was too late to offload the stock and felt that barring a near-term dead-cat bounce, the stock will mark time until the new CEO is announced.
Kotak Institutional Equities has reduced its target price on the stock to Rs 850 from Rs 1,400 earlier, while downgrading the stock to 'Reduce' from Buy'. MOFSL suggested a revised price target of Rs 925. ICICI Securities suggested a price target of Rs 850. Nuvama sees the stock at Rs 750 while Nirmal Bang pegs the stock at Rs 900. PL Capital sees the stock at Rs 1,000.