Shares of IndusInd Bank nosedived on Monday, plunging 6.8 percent, following the Reserve Bank of India's (RBI) approval for the reappointment of Sumant Kathpalia as the Managing Director and CEO for a two-year span instead of three years as proposed by the board.
During Monday’s trade, the stock opened at a price of Rs. 1,117.95 per share against the previous close of Rs. 1,145.80 per share and dipped further during the early trading session to touch an intraday low of Rs. 1,067.75.
It was trading at ₹1,074.20, down by 6.22 percent, at 10:55 a.m. on the BSE.
The stock touched a 52-week high of Rs. 1,275.80 on September 20, 2022 and a 52-week low of Rs. 763.20 on June 23, 2022, indicating that at the current level, the stock is trading over 40 percent above its 52-week low and 15.8 percent below its 52-week high.
The stock has declined nearly 7 percent in the last one month. However, in the past one year, it has grown by almost 18 percent.
Sumant Kathpalia's two-year extension as IndusInd Bank's MD and CEO, instead of the previously ratified three-year period, has left foreign brokerages somewhat bemused.
Since his appointment, Kathpalia has been a driving force in propelling the bank's expansion with significant improvements in central financial and business results.
At IndusInd Bank, Kathpalia has been an integral member of the executive committee for the past 15 years, playing a major role in transforming the bank. He has taken part in financial supervision across the whole bank, liaising with investors and scouting out potential growth avenues.
The bank's board had in September 2022 greenlit Kathpalia's re-appointment from March 24, 2023 to March 23, 2026. However, after half a year, the RBI’s approval has come for merely two years, contrary to Street forecasts.
Brokerage house JPMorgan has slashed its target for IndusInd Bank stock to ₹1,060 per share and downgraded the rating to 'neutral', due to the tightening liquidity conditions in the market. As the bank's reappointment was approved for only two years, it could put them at a disadvantage, reported Moneycontrol.
Morgan Stanley has assigned an 'overweight' rating to the stock and set a target of ₹1,525 per share. Although analysts are unsure why the tenure extension was not higher, there have been instances of both longer and shorter extensions in the past, it said.
The private sector lender reported a 58 percent jump in its December quarter net profit at ₹1,964 crores, driven by improvements in asset quality and core income.
The bank's net interest income grew 18 percent to ₹4,495 crore, driven by a 19 percent loan growth and a 0.17 percent widening in the net interest margin to 4.27 percent.
IndusInd Bank has a market capitalization of ₹83,426.90 crore.
According to a MintGenie poll, 42 analysts on an average have a ‘BUY’ call on the stock.