(Reuters) – IndusInd Bank shares fell nearly 6% on Monday to its lowest level since July 2022 after the country’s central bank approved a shorter extension after its chief executive term approved a shorter extension.
The stock fell 3.3% to Rs 905.85 as of 11:01 am IST, the biggest loser on the Blue Chip Fine 50, which rose 0.3%.
Industrial Bank said on Friday it received approval from the Reserve Bank of India to put Sumant Kathpalia as CEO for one year, a year shorter than the board approval and the typical three-year extension for the central bank.
“Although the RBI has not provided any explanation for the one-year extension only, we believe that the progress of its conditions during the earlier extension period is unsatisfactory in other concerns, including the portfolio of microfinance (MFI) (NPAS (bad performance) (bad performance) that leads to higher NPAS.”
Like many other Indian banks, Indusind is dealing with increased pressure on its microfinance segment, and its total NPA ratio is deteriorating.
Nuvama noted that given the Reserve Bank of India (RBI) favoring external CEOs in its recent appointments, if this happens, the visibility of near-term earnings already affected by a weak trend will become lower.
Jefferies said among the internal candidates that the bank’s deputy CEO Arun Kurana may be the leader in the top position.
“We believe the stock will be sales until Indusind’s succession plan is clarified and stable in MFI and auto loans,” Jeffries said.
After the news, at least six brokers, including Emkay, lowered their price targets for Indusind stock. According to data compiled by LSEG, the median target price for the median of 38 brokers is Rs 38, compared with Rs 1,280 a month ago.
(Reports by Meenakshi Maidas and Siddhi Nayak; Edited by Varun HK)
