IndusInd Bank down 4% as Goldman Sachs downgrades to 'Neutral', cuts target

IndusInd Bank share price: Private banking company IndusInd Bank shares fell as much as 4.29 per cent to hit an intraday low of Rs 938.80, nearing its 52-week low of Rs 927.05.

 

Notably, IndusInd Bank share was also the top loser on BSE. 

The downfall in the IndusInd Bank share price came after reports indicated that the New York-based brokerage Goldman Sachs downgraded the stock to ‘Neutral’. The brokerage also slashed the target price to Rs 1,090. However, the reduced target price reflects an upside potential of 11.12 per cent from the previous close of Rs 980.90 on January 9, 2025. 

 

 

In a report dated January 1, 2025, the New York-based brokerage Jefferies highlighted near-term challenges for IndusInd Bank, attributing them to its exposure to the MFI segment, which accounts for 35 per cent of its loans, amid an industry-wide rise in defaults. 

 

Additionally, the vehicle finance segment faces headwinds due to weaker demand for commercial vehicles (CVs) and adjustments in the two-wheeler (2W) and tractor categories.

These factors are expected to exert pressure on the bank’s near-term growth, margins—given the higher yields in these segments—and credit costs. 

 

Consequently, Jefferies has revised its earnings estimates for FY26-27 downward by 12-13 per cent. Return on equity (RoE) is projected to remain low in FY25 before stabilising around 13 per cent.

 

The bank is also awaiting the Reserve Bank of India’s (RBI) approval for the reappointment of its CEO, with the decision expected before March 23, 2025, when the current term expires.

 

Despite these challenges, Jefferies noted that the stock’s valuation is appealing at 1x FY26 adjusted price-to-book (PB) and 9x price-to-earnings (PE). However, a re-rating is likely only with an improved operating environment and clarity on the CEO’s reappointment. 

 

Accordingly, the brokerage lowered its target price for the stock from Rs 1,470 to Rs 1,200, based on 1.2x December 2026 adjusted PB, while maintaining a ‘Buy’ rating.

 

Last year in December, Zurich, Switzerland-based brokerage UBS slashed IndusInd Bank target price to Rs 1,150 per share. However, the brokerage maintained a ‘Neutral’ rating.

 

Nomura analysts, in a note dated December 10, 2024, highlighted concerns stemming from regulatory tightening by the Reserve Bank of India (RBI). They noted that many investors view the banking sector as increasingly challenging to invest in, apart from a select group of high-quality names. While any relaxation in the current draft regulations could positively impact the sector’s loan growth and profitability outlook, the likelihood of such changes remains uncertain.

 

IndusInd Bank financial performance

 

IndusInd Bank reported a 39.5 per cent year-on-year (Y-o-Y) drop in its net profit, which stood at Rs 1,331.29 crore for the second quarter of the current financial year (Q2FY25). The decline was primarily due to a major increase in provisions, which nearly doubled to Rs 1,820 crore, compared to Rs 974 crore in the same period last year.

 

The bank's net interest income (NII) grew 5 per cent Y-o-Y to Rs 5,347 crore. However, its net interest margin (NIM) saw a slight decline, falling to 4.08 per cent from 4.29 per cent in the previous year, partially attributed to a reduced proportion of microfinance loans.

 

IndusInd Bank share price history

 

IndusInd Bank share price has dropped about 3.5 per cent in the last five trading sessions. The stock has dropped about 3 per cent in the past month. The IndusInd Bank share has fallen over 41 per cent in the last one year.

 

About IndusInd Bank

 

IndusInd Bank Limited has a rich 30-year legacy of redefining banking through innovation and progressive financial solutions. With a focus on delivering an elevated banking experience, the Bank caters to a diverse range of stakeholders, including government entities, public sector units (PSUs), retail customers, and large corporations. 

 

Its portfolio includes microfinance, personal loans, SME loans, debit/credit cards, vehicle financing, affluent and NRI banking services, advanced digital banking facilities, and ESG-linked financial products.

 

At 1:43 PM, IndusInd Bank shares were trading 4.18 per cent lower at Rs 939.85 per share. In comparison, BSE Sensex was trading 0.03 per cent lower at 77,595.80 levels.