IndusInd Bank slips 16% in three days despite clarification on HFC exposure

The stock was trading lower for the third straight day, down 6 per cent at Rs 1,304 on the BSE.

Shares of IndusInd Bank were under pressure for the third straight day, down 6 per cent at Rs 1,304 on the BSE on Tuesday despite the bank issuing clarification that its exposure to housing finance company (HFC) is fully/strongly collateralised with no overdues.

In the past three trading days, the stock of private sector lender has slipped16 per cent, as compared to a per cent fall in the S&P BSE Sensex. At the time of writing of this report, it was trading close to its 52-week low of Rs 1,268 touched on August 26.

“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 maintain a cautious stance on the IndusInd Bank’s asset quality given the bank’s high exposure to stressed sectors (real estate, power, telecom) and groups amidst a weak operating environment, which pose a risk to slippages.

Moreover, concentration risk remains high with top 20 exposures constituting 14 per cent of loans vs 12 per cent for private peers as of FY19. Further, concern over the management transition could also limit meaningful price/valuation upside, the brokerage firm said in a company update.

According to a Business Standard report, the Reserve Bank of India (RBI) may not give an extension to Romesh Sobti, Executive Director of IndusInd Bank after his current term ends. CLICK HERE TO READ FULL REPORT