IndusInd Bank shares took a hit on Monday, falling nearly 5.4% to ₹886.40 after the Reserve Bank of India (RBI) approved only a one-year extension for its CEO, Sumant Kathpalia. The bank’s board had recommended a three-year extension, but this is the second time the RBI has granted a shorter term.
Why Did the IndusInd Bank Stock Fall?
The market reacted negatively to this decision as investors worry about leadership uncertainty. Over the past month, the stock has already declined by 17%, and in the last year, it has dropped over 40% from its peak of ₹1,576.
Some reports also suggested that Nippon Life might invest in IndusInd Bank, but analysts believe this is unlikely to happen.
Similar Cases in the Past
This isn’t the first time such a situation has impacted a bank’s stock price. When similar short-term extensions were given to CEOs at RBL Bank, Bandhan Bank, and Federal Bank, their stock prices also fell initially but later recovered.
Analysts’ Views on the Stock
Different brokerages have given mixed reactions:
- UBS: Downgraded the stock to “Sell” with a target price of ₹850, citing leadership uncertainty.
- BofA Securities: Lowered its rating to “Underperform” with a target of ₹850, saying it could take 12-18 months for clarity on management changes.
- Jefferies: Cut its target price to ₹1,080 but maintained a “Buy” rating, believing the stock offers long-term value.
- Citi: Maintained a “Buy” with a ₹1,378 target, though it acknowledged uncertainty regarding the bank’s leadership.
- Goldman Sachs: Rated it “Neutral” with a target of ₹964.
- Macquarie: Kept its “Outperform” rating with a ₹1,210 target.
- MOFSL: Believes most of the negativity is already priced in and maintained a “Buy” with a revised target of ₹1,100.
What’s Next for IndusInd Bank?
With the CEO’s short-term extension and uncertainty over future leadership, the stock may remain under pressure in the near term. However, some analysts see this as a buying opportunity due to the bank’s low valuation.