IndusInd Bank hits over 2-yr low on worries over exposure to stressed firms

Shares of IndusInd Bank were trading lower for the fourth straight day, hitting an over two-year low of Rs 1,220, down 6 per cent on the BSE on Thursday on concerns over exposure to stressed sectors. The stock of private sector lender was trading at its lowest level since January 23, 2017.

In the past four trading days, the stock has tanked 21 per cent, despite bank’s clarification that its exposure to housing finance company (HFC) is fully/strongly collateralised with no overdues. In comparison, the benchmark S&P BSE Sensex was down 2.3 per cent during the period.

“The bank's gross exposure (aggregate of funded and non-funded) to the HFC, its subsidiaries and associate finance companies stands at approximately 0.35 per cent of the loan book. The exposure to HFC is fully/strongly collateralised with no overdues. The group also maintains equal or higher amounts of unpledged fixed deposits with the bank,” IndusInd Bank said in a BSE filing on Monday. The bank made clarification on speculation on the bank's exposure to a large HFC.

Analysts at Reliance Securities believe the bank’s high exposure to stressed sectors and management transition could continue to limit any meaningful upside in the stock price in near-to-medium term.

“While its superior margin and healthy fee income profile continue to aid return ratios, asset quality surprises can’t be ruled out given the high concentration in corporate portfolio, a weak operating environment and elevated exposure to stressed sectors including real estate, Power (NFB), and Telecom (NFB),” the brokerage firm said in a management meet update note on September 26, 2019.

At 11:17 am, IndusInd Bank was trading 4 per cent lower at Rs 1,237 on the BSE, against a 0.42 per cent fall in the Sensex. A combined 6.6 million shares changed hands on the counter on the NSE and BSE till the time of writing of this report.