Turnaround ahead? Emkay Global upgrades IndusInd Bank to Buy, raises target

Emkay Global upgrades IndusInd Bank to Buy and raises target price to ₹1,100, citing leadership change, earnings recovery, RoA improvement, and asset quality moderation

Emkay Global upgrades IndusInd Bank stock, raises share price target

Domestic brokerage Emkay Global Financial Services has turned constructive on IndusInd Bank, upgrading the stock to 'Buy' from ‘Reduce' and sharply raising its target price, based on growing confidence in the bank's sustained turnaround. 

The brokerage believes the bank has moved past a phase of volatility marked by earnings pressure and governance concerns, and is now entering a more stable recovery cycle driven by leadership reset and balance-sheet recalibration. 

"We are confident that the new management will fix structural gaps, including reorienting the asset-liability mix, strengthening governance/internal controls, and rebuilding leadership, thus setting the stage for a sustained turnaround," the brokerage said in its latest report on the lender. 

 

Emkay Global has raised IndusInd Bank's share price target to ₹1,100 from ₹800 earlier, acknowledging the change in the top management and improving financial metrics.

Leadership change under new MD

A key driver behind the brokerage's rating and target upgrade is the appointment of Rajiv Anand as the new Managing Director and Chief Executive Officer (MD and CEO) in August 2025. 

Anand, a veteran banker with prior experience at Axis Bank and global financial institutions, has initiated a comprehensive organisational overhaul aimed at strengthening governance standards, credit-risk oversight and internal controls, Emkay noted. 

The new management, it added, has moved swiftly to rebuild the senior leadership bench across wholesale banking, risk, compliance, technology and human resources. The effort aims to dismantle internal silos and align asset-liability management under a unified "One IndusInd Bank” framework.  ALSO READ | Pvt banks to outperform PSBs post H1FY27: PL Capital; bets on SBI, ICICI Bk 

"The appointment of Rajiv Anand could result in a sustained turnaround of the once formidable retail bank. We believe that the bank does not need to be built from scratch but requires restoring the structural portfolio, bridging leadership gaps, and strengthening governance/internal controls," Emkay Global said. 

The brokerage believes that a sharper focus on retail liabilities, improved branch productivity and a more calibrated approach to loan growth will help stabilise margins and reduce reliance on higher-risk segments. 

"A clearer and detailed articulation of this medium-term strategy is likely to emerge post Q1FY27 results, setting the stage for a more durable recovery in the medium term," it said.

Earnings recovery and improving return ratios

Another reason for the upgrade is a visible improvement in IndusInd Bank's financial health. After reporting weak profitability in FY26, including a temporary dip in return on assets (RoA), the bank has guided for credit growth in line with the system and an exit RoA of around 1 per cent in FY27. 

Emkay expects earnings to rebound meaningfully over FY27–FY29, aided by moderating credit costs, better asset quality and gradual margin recovery. Loan growth is projected to recover from a contraction in FY26 to double-digit expansion in FY27 and beyond. Net interest income (NII) growth is also expected to pick up as the bank rebalances its loan book towards consumer retail while strengthening its deposit franchise. 

Emkay Global estimates RoA to improve to 1.3–1.5 per cent by FY29, compared with negligible levels seen during the recent downturn. Return on equity (RoE) is also expected to trend higher as profitability normalises and operating leverage kicks in. 

"While net interest margins may not revisit earlier peaks, given a conscious shift away from riskier, high-yield segments, the  quality of earnings is projected to improve," it said.  ALSO READ | ICICI Prudential AMC gets new 'Buy' from Antique on 'superior execution' 

Importantly, asset quality stress is expected to moderate from FY27 onward as the bulk of balance-sheet clean-up is undertaken in FY26. A more prudent underwriting framework and tighter risk filters, particularly in microfinance and commercial retail exposures, are seen containing volatility. 

"The management has given guidance for the credit cost moderating to ~1.6 per cent in FY27 from 2.6 per cent now and thus supports the RoA. The management has also pointed to a transitional ECL impact of up to 1.5-1.7 per cent (pre-tax) of loans which, we believe, the bank will absorb via its opening net worth in FY27 and, thus, it is unlikely to hurt the P/L," Emkay said.

Triggers for IndusInd Bank re-rating

Improving sectoral tailwinds (growth/margin/asset quality) and positive sentiment toward large private sector banks, Emkay said, should aid IndusInd Bank's re-rating. 

The brokerage now values the bank's stock at 1.3 times FY28E book value and 11 times FY28E EPS. 

"Any further re-rating will be contingent on sustained execution of the management strategy and no asset quality/regulatory interruptions," it said.  =============================  Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.