IndusInd Bank has experienced its sharpest drop in stock value in the past four years, following disappointing earnings results for the September quarter. On October 25, the stock fell by 19%, largely due to higher provisions linked to slippages in the bank's microfinance portfolio.
These provisions, alongside a 40% year-on-year dip in net profit, led to a significant fall in the stock price. The weak performance was compounded by an overall downturn in the markets, driven by relentless selling from foreign portfolio investors (FPIs). The stock has since hovered around ₹1,060, marking a 34% decline on a year-to-date basis, even as the Nifty Bank index has seen an 8% gain during the same period.
Earnings disappointment and slippages in the microfinance portfolio
The primary reason behind the steep decline in IndusInd Bank's stock was the bank's underwhelming earnings for the September quarter. The significant rise in provisions, mainly due to slippages in the microfinance sector, heavily impacted its net profit, leading to a sharp 40% decline. Analysts, considering the bank's current stock performance, have been assessing whether IndusInd Bank remains a viable option for share market investment. However, despite the recent struggles, some analysts maintain that the worst may already be priced into the stock.
Analysts see potential upside despite recent downturn
Despite the considerable drop in IndusInd's stock, analysts are still optimistic about its future potential. The consensus 12-month target price for the bank, compiled by Bloomberg, is ₹1,489 per share, suggesting a potential 40% upside from the current price of ₹1,060. This target price, however, has been revised down from ₹1,750 prior to the September results.
Currently, the stock has 37 "buy" ratings, down from 43, while the "hold" ratings have risen to 11 from 5. Some analysts even upgraded their outlook, with two analysts now issuing "sell" ratings, up from just one previously.
Should investors consider IndusInd Bank?
IndusInd Bank's recent performance has raised questions about its investment potential. While the stock has been hit hard by disappointing earnings and ongoing challenges in the microfinance sector, analysts are divided. Some see significant upside potential, while others remain cautious.
Investors looking to make informed decisions about their share market investment may want to consider the risks and rewards carefully, keeping an eye on the bank’s performance in the coming quarters.
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