Analysts had noted that shares of the firm will plunge due to the lower than expected tenure
NEW-DELHI: IndusInd Bank shares dropped 6.4% on Monday (March 13), after the Reserve Bank of India (RBI) approved the re-appointment of Sumant Kathpalia as the Managing Director and Chief Executive Officer (CEO) of the bank for two years.
It is worth noting that the IndusInd bank's board had approved a three-year term for Sumant Kathpalia in September 2022. As per the proposal, It was expected that Kathpalia's term would be extended by another three years but Kathpalia got lower than expected term.
Analysts had noted that shares of the company will plunge due to the lower than expected tenure for the Chief Executive Officer. Notably, Kathpalia's current term as CEO wll end on March 24 this year.
Reportedly, An American multinational investment company, Morgan Stanley stated, "We continue to see strong potential for revenue growth acceleration and credit cost moderation at IndusInd, which can drive re-rating as well over the next few years. Near term, the lower than expected tenure extension could drive some volatility in the stock. The brokerage continues to remain 'overweight' on the stock."
In a report, Nuvama Research stated, "Maintaining a hold rating on the lender as it sees limited downside but also believe upside is capped. The brokerage reduced the target price by 5 per cent to ?1,300 (1.4 times FY25). The stock has come off 7 percent since Q3FY23 earnings dithering ahead of the RBI's decision. The two-year term brings relief, it is long enough to groom a new CEO, if needed—but not long enough to execute key initiatives."
In a statement, Jefferies said, "The lower tenure extension may be a reflection on the need to improve on controls (MFI incidence), liabilities (retail mix), and underwriting (retail and less risky). We see this as reasonable time to demonstrate progress as the bank had already made moves on these counts. Since valuation is attractive at 1.4 times FY24 price-to-book ratio, Jefferies has a 'buy' stance with target price lowered to ?1,550 from ?1,600."
Reportedly, It added, "The lower term extension may be a reflection on the need to improve on controls , liabilities , and underwriting. We see this as reasonable time to demonstrate progress as the bank had already made moves on these counts."
Talking about the Monday's trade situation, the stock opened at a price of ?1,117.95 per share against the previous closing price of ?1,145.80 per share and slipped 6.23 percent on the BSE to trade at ?1,074.10. The stock found a low of ?1,067.75.