Nomura increased its price target on the private lender by 50%, from Rs 700 to Rs 1,050, and upgraded its rating from โneutralโ to โbuyโ. The new target implies a potential 30% upside from Tuesdayโs closing price.
โThe past few months have been turbulent for IndusInd Bank owing to governance failings and accounting lapses. However, the bank has undergone a significant clean-up of its books and has taken one-time provisions to address legacy issues,โ Nomura said.
The brokerage noted that the bankโs board is showing a โclear intent to start FY26F on a clean slateโ and highlighted the ongoing search for new leadership as a constructive step.
It also cited โrecent comments from the Reserve Bank of India (RBI) acknowledging IndusInd Bankโs recovery effortsโ as a source of regulatory comfort, adding that potential approval for the promoter to raise its stake could help ease investor concerns.
Stronger fundamentals, improved outlook
Nomura compared IndusInd Bankโs current trajectory to past turnaround cases such as RBL Bank in 2021 and Yes Bank in 2018, where concerns over asset quality prompted leadership changes. In both instances, โwhile near-term stock performance was muted, we did see a revival of performance over the medium term as fundamentals improved,โ the brokerage noted.
It highlighted IndusIndโs healthy capital and liquidity buffers, with a CET-1 ratio of 15.1% and a Liquidity Coverage Ratio (LCR) of 118%. The bankโs โstrong business model in retailโ is expected to support a faster recovery in profitability.
Nomura raised its FY27โ28F earnings per share (EPS) estimates by 14โ16%, citing stronger net interest income (NII) and lower credit costs. It now expects return on assets (RoA) to improve to 0.8โ1.1% and return on equity (RoE) to 7โ10% over FY26โ28F.
Importantly, Nomura believes โIndusInd Bank’s profitability outlook is stronger than that of State Bank of India and Bank of Baroda.โ At 0.9 times its one-year forward book value per share (BVPS), the stock’s valuation appears โinexpensive.โ
However, the brokerage flagged key risks, including โthe possibility of further discrepancies in the books and delays in appointing new leadership.โ
The stock remains down nearly 17% so far in 2025.
Also read | Pick up defence stocks for long term; 2 shipping stocks to buy: Neeraj Dewan
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Source link
