IndusInd Bank share: 6 key triggers for stock; cues from YES Bank, RBL Bank selloffs

IndusInd Bank Ltd shares at 0.7 times book value might look attractive to some investors, stock brokerages believed six triggers would play a key role in any sustained recovery on the banking counter.

First, investors would be keenly following whether there is any further adverse impact from the external audit that is underway. Investors may also want to see whether there is any additional RBI intervention.

Third, investors may look for hiring of an experienced external CEO, preferably from the private sector. They may also want to see promoter stake increasing post the regulatory approval, analysts said.

All eyes would also be on earnings recovery via asset quality improvement in MFI and unsecured retail. Lastly, investors would seek signs of stronger internal controls, accountability, and corrective actions.

"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," Sharekhan said.

This brokerage downgraded the stock to 'Hold' and suggested a target price of Rs 750.

"Near term uncertainty likely to prevail as over the past 3 months, CFO has resigned, CEO has been given shorter extension by RBI and now we are aware of potential loss in derivative portfolio. Earnings visibility is also muted for FY26 due to weak MFI cycle and stress in other unsecured retail segment. Although valuations appear to be cheap, building investment case is difficult," Sharekhan said.

CLSA noted that when the RBI gave a one-year extension to the MD of RBL Bank, and later appointed a PSU banker, the stock crashed 60 per cent, as the Street feared there would be skeletons in the closet.

That said, over the ensuing quarters nothing emerged and the stock recovered its losses.

"A similar but temporary phenomenon happened with YES Bank, with a forced-CEO exit followed by a nil GNPL divergence report. IndusInd Bank stock price trajectory should be no different in our view. We cut our estimates 9-25 per cent (for the one-off accounting hit and lower growth) and cut our target price from Rs 1,300 to Rs 900 but maintain our 'Outperform' rating," CLSA said.

The foreign brokerage said if a PSU banker is appointed, there would be even more negative sentiment for the stock. Also, the potential invoking of the promoter’s stock pledge by its lenders would add to the uncertainty, it said.

"But, over time, we believe its fundamentals will take over. If IIB delivers numbers broadly in line with expectations over the next 4-6 quarters, we believe concerns will subside," it said.

A non-fundamental positive could be the promoter getting RBI approval to increase its stake in the bank after its acquisition of Reliance Capital is completed. Any stake purchase by the promoter will definitely boost investor confidence, CLSA said.