Emkay Global raises share price target of Karur Vysya Bank
Domestic brokerage Emkay Global Financial Services has raised its share price target on
Karur Vysya Bank (KVB) as it believes the once underperforming regional player has turned itself into a differentiated franchise delivering consistent growth, strong profitability and disciplined risk management.
The brokerage has retained its 'Buy' rating on the stock, while increasing its target price to ₹390 from ₹340, valuing the bank at 2x FY28 estimated adjusted book value.
In a report dated February 27, Emkay Global noted that Karur Vysya Bank is clocking sustained loan growth of over 17 per cent while maintaining a return on assets (RoA) of more than 1.7 per cent.
This, the brokerage said, has helped the bank become a strong regional bank with a diversified, quality-focused, credit portfolio.
"Factoring in the strong growth trajectory, superior RoA delivery (1.6-1.9 per cent), management credibility, and capital buffers (CET 1: >16 per cent), we retain 'Buy' on the stock while raising our target price by around 15 per cent," it said in its report.
Karur Vysya Bank's loan portfolio
According to Emkay Global, KVB has been proactive in safeguarding the bank's asset quality by curtailing exposure to riskier segments such as microfinance institutions (MFI) and buy-now-pay-later (BNPL) portfolios well in advance.
Recently, the bank also tightened risk filters in its gold loan book to shield itself from potential price volatility in the precious metal.
KVB’s credit portfolio has steadily diversified, with a growing emphasis on retail, agriculture and MSME (RAM) segments. Going ahead, the brokerage noted that the lender expects continued momentum in loan growth, particularly in loan against property (LAP) and gold loans, alongside selective expansion in unsecured products such as credit cards and personal loans.
"Affordable housing is also emerging as a focus area as part of its broader asset diversification strategy," Emkay Global noted.
On the liabilities side, KVB has been able to grow its deposit base by 16 per cent, though driven by term deposits, in an environment where deposit mobilisation has been an industry-wide challenge.
To further mop up deposits, the management plans to expand its branch network and strengthen sourcing frameworks to improve current and savings account (CASA) mobilisation.
Lower costs to aid return ratios
The bank reported a net interest margin of 3.99 per cent in the third quarter of FY26 (Q3FY26), surpassing expectations, and has guided for a full-year margin range of 3.9–3.95 per cent.
Emkay Global noted that Karur Vysya has expanded revenues in recent years through improved margins and higher fee income, including priority sector lending certificate (PSLC) income.
The lender has also been able to strengthen its operating efficiency considerably with the cost-to-income ratio declining to 42.5 per cent in Q3FY26 from over 50 per cent in earlier years.
This has been driven by technology investments and restructuring expenses tapering off.
That apart, the bank has been able to manage its stressed assets with net non-performing assets at a historic low 0.2 per cent and credit costs contained at about 0.5 per cent of loans.
"These factors have driven a sharp turnaround in profitability. RoA has improved from 0.9 per cent in FY22 to 1.7 per cent in FY25, with Q3FY26 RoA touching 2.1 per cent, aided partly by a one-off gain. We expect FY27 RoA at 1.9 per cent, factoring in some moderation in treasury gains and margins as the loan mix evolves," Emkay Global said.
MD and CEO extension
On leadership continuity, the brokerage noted that while the board has sought a three-year extension for the current managing director and chief executive officer (MD and CEO) B Ramesh Babu, he is inclined toward a two-year term while simultaneously putting in place a succession plan.
Emkay Global thinks this structured transition could mirror precedents seen in comparable regional banks, such as City Union Bank, where current MD and CEO extension overlaps with the future MD’s.
Nonetheless, the brokerage expects the transition to be smooth, ensuring stability as KVB sustains its growth trajectory.
Karur Vysya Bank share price information
Karur Vysya Bank has 97.4 per cent of its outstanding shares (966.4 million) as free float. The bank’s market capitalisation stands around ₹32,500 crore.
KVB share price hit a 52-week high of ₹344, and a 52-week low of ₹154.
Over the past one month, Karur Vysya Bank share price has rallied 26.6 per cent, while in the past three months the stock has surged 33.5 per cent.
Further, in the last one year, Karur Vysya Bank shares have yielded returns of 92.5 per cent for its investors.
By comparison, the Nifty50 index has risen 1.28 per cent in one month, slipped 2.7 per cent in three months, and rallied 13 per cent in one year.
Analysts at Emkay Global expect KVB to exit FY26 with a price-to-earnings (P/E) ratio of 13.6x, and price-to-adjusted book value (P/ABV) of 2.3x.
============== Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.
 "Emkay Global raises Karur Vysya Bank target on strong RoA, loan growth")
