23.1 C
New Delhi
Monday, March 20, 2023
HomeBusinessBrokerages wary of IndusInd CEO’s reduced 2nd term

Brokerages wary of IndusInd CEO’s reduced 2nd term

The Reserve Bank of India (RBI)’s decision to give a two-year extension to IndusInd Bank’s chief executive officer Sumanth Kathpalia, instead of three years, has surprised analysts and investors.

Brokerage JP Morgan has downgraded the private sector bank to neutral and reduced its target to 1,060 per share. “We note over past five trading sessions, IIB (IndusInd Bank) has outperformed on expectations of RBI granting a three-year extension, and we expect the stock to react negatively. So far, no reason is provided for the same by RBI which would highlight any operational concerns,” said JP Morgan in its report on Monday.

IndusInd Bank shares fell 7.46% to 1,060 on Monday as the market was disappointed over Kathpalia’s reduced second tenure. IndusInd shares rose by 9.45% so far in this financial year compared with Bank Nifty’s 6.5% rise, indicating its better performance than that of the Bank Nifty.

Kathpalia was appointed as the MD and CEO in 2020, following Romesh Sobti’s retirement. Last September, the IndusInd Bank board had approved a three-year extension to Kathpalia and sent the proposal for final nod to RBI. Kathpalia’s current term as the CEO ends on 24 March. In February, the bank appointed Sunil Mehta as the new part time chairman for a period of three years.

Macquarie research said the investors are asking whether the central bank is comfortable with Kathpalia as the MD and CEO. “In our view, IIB’s MD and CEO stabilised the bank, focused on retail liabilities, recognised asset quality issues, and worked on improving balance sheet granularity, and eventually improved its return ratios. We are not sure if the whistleblower complaint regarding the MFI (microfinance) book played a role in RBI’s decision,” Macquarie said in a report on Monday.

Jefferies said a reduced second term may mean a pullback on growth and defer re-rating. It trimmed loan growth estimate by 100 basis point for FY24-25.”The lower term extension may be a reflection on the need to improve on controls (MFI event), liabilities (retail mix), and underwriting (retail and less risky). We see this as reasonable time to demonstrate progress as the bank already made moves on these counts.”

The market will watch other reappointments due this year, such as that of ICICI Bank‘s Sandeep Bakshi, HDFC Bank’s Sashidhar Jagdishan, Kotak Mahindra Bank’s Uday Kotak and City Union’s N. Kamakodi.

Catch all the Corporate news and Updates on Live Mint.
The Mint News App to get Daily Market Updates & Live Business News.


Source link

Our Archieves