The big contrarian call from CLSA at this hour, it has maintained the Outperform rating on IndusInd Bank now with a revised target price of Rs 900 per share. Though CLSA has cut estimates by 9-25% (for the one-off accounting hit and lower growth) and cut target price to Rs 900 per share from Rs1,300 per share, the target implies over 30% upside from current levels.
CLSA, drawing parallels from similar events at other banks like RBL Bank and Yes Bank and highlights that “In the near-term, sentiment alone drives the stock, but in the medium-term fundamentals do. When the RBI gave a one-year extension to the MD of RBL Bank, and later appointed a PSU banker, the stock crashed 60%. The street feared there would be skeletons in the closet, however, 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. IIB’s stock price trajectory should be no different in our view.”
ALSO READIndusInd Bank plunges 25%, biggest single-day crash; Brokerages slash target price by 30% CLSA on IndusInd Bank: What could happen now?
The IndusInd Bank share price continues to be under pressure but what’s going to happen next? CLSA predicts that “there will be lingering uncertainty over more skeletons in the closet and management continuity. If a PSU banker is appointed, there would be even more negative sentiment for the stock.” According to the international brokerage house, “the potential invoking of the promoter’s stock pledge by its lenders would add to the uncertainty.” But, over time, they believe “its fundamentals will take over. If IndusInd Bank delivers numbers broadly in line with expectations over the next 4-6 quarters, we believe concerns will subside.”
ALSO READIndusInd Bank – The Whys and Hows behind the “Accounting discrepancy” CLSA on IndusInd Bank: Are there any positives?
According to CLSA, there are fundamental positives in the near-term for IndusInd Bank. These are
- ”Recovery in microfinance
- Respite for margins from better banking system liquidity, and rate cuts.”
The report added that 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).”
CLSA on IndusInd Bank: RBI’s role
CLSA report on IndusInd Bank states “mixed signals from the regulator:” While the
» Read More
