What drove the rally in IndusInd Bank shares today? Check details here

Foreign Portfolio Investors increased their holding in the bank by nearly 5 percentage points to 29.5% in March 2025 quarter from 24.7% at the end of December 2024 quarter.

Shares of IndusInd Bank have moved higher by 8 per cent to ₹741.10 on the BSE in Tuesday’s intra-day trade. The stock price of the private sector lender has gained 20 per cent from its previous week low of ₹618.05 touched on Monday, April 7. It had hit a 52-week low of ₹605.40 hit on March 3, 2025.

 

The company's March 2025 quarter shareholding pattern reveals that Foreign Portfolio Investors (FPIs) increased their holding in the bank by nearly 5 percentage points to 29.5 per cent. FPIs held 24.7 per cent stake in IndusInd Bank at the end of December 2024 quarter, data shows.

 

Meanwhile, domestic mutual funds (2.76 percentage points), insurance  companies (1.84 percentage points) and provident funds/pension funds (0.88 percentage points) have cut their holding in IndusInd Bank by up to nearly 3 percentage points, the shareholding pattern data shows. Retail individual shareholders, however, have increased their holding in IndusInd Bank to 17.9 per cent from 16.2 per cent.

 

In four trading days, between March 6 and March 12, the stock price of IndusInd Bank had tanked 38 per cent as the lender was hit by a major accounting discrepancy. IndusInd Bank, on March 10, informed its shareholders that an internal review of forex derivative transactions has unearthed an accounting mismatch worth ₹1,577 crore (post-tax), which is about 2.35 per cent of the bank’s net worth at the end of December 2024. However, the bank said its profitability and capital adequacy remains healthy to absorb this one-time impact.

 

The Board and the management have been directed by Reserve Bank of India (RBI) to have the remedial action completed fully during the Q4FY25, after making required disclosures to all stakeholders. As such, there is no need for depositors to react to the speculative reports at this juncture. The bank’s financial health remains stable and is being monitored closely by the Reserve Bank, the RBI said in a statement dated March 15, 2025. 

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The past year has been challenging for IndusInd Bank. The outcomes have been less than desired and marred by event risks. This was reflected in price movement with more than 45 per cent correction in the past six months. 

 

According to Emkay Global Financial Services, in Q4FY25, IndusInd Bank is expected to post a loss, unless offset by contingent provision reversal given the sharp decline in credit growth, higher LLP, and recognition of derivative loss.

 

The brokerage firm trimmed its earnings estimates by 15-18 per cent over FY25-26E, as the bank is expected to post a loss in Q4FY25E (unless offset by contingent provision reversal) given the sharp decline in credit growth, higher LLP, and recognition of derivative loss.

 

“Accordingly, we decrease our target multiple to 0.9x on March 2027E ABV vs. earlier 1x on December 2026E ABV, and revise our target price by 8.6 per cent to ₹800 from ₹875. We retain ADD on the stock, from the medium-to-long term perspective, taking comfort from the reasonable valuations for a bank capable of delivering higher RoA (1.4-1.5 per cent) over FY26-27E as the asset quality tide takes a turn for the better,” analysts at Emkay Global Financial Services said in the Q4FY25 preview.

 

Earnings witnessed a decline owing to higher provision amid elevated slippages in microfinance portfolio, though the proportion of SMA remained steady at 4 per cent. While management has indicated early signs of improvement with healthy flows in X bucket (excluding Karnataka which is gradually stabilising), sustainability is yet to be proven. Expect continued elevated credit cost in Q4FY25, post which stress could witness a declining trend, analysts at ICICI Securities said in a report dated March 12, 2025.

 

At current valuation (~0.7x FY27E ABV), the stock seems to be cheap, however, given the challenge in microfinance exposure and uncertainty surrounding leadership and business model, the brokerage firm downgraded the stock from 'Buy' to 'Hold' with revised target price of ₹800 per share.