Explained: Why IndusInd Bank shares rose 6% today
Shares of IndusInd Bank surged by nearly 6% on Wednesday, reaching Rs 853.65 per share during the trading session.The sharp rise came after global brokerage firm Nomura upgraded its rating on the stock to 'buy' and increased the target price to Rs 1,050 from Rs 700. This new target price indicates a possible upside of 25% from the current level.Over the last year, IndusInd Bank's stock had fallen by 43.51%. However, it has shown signs of recovery in recent weeks, rising around 8.63% in the past month. Over a longer period, the stock has delivered a gain of 76.11% in the last five years and has increased by 3,754.07% since it was listed on the stock market.NOMURA'S POSITIVE OUTLOOKAnalysts at Nomura believe that most of the bank's old problems have now been addressed. They expect the bank's return on assets (RoA) to reach 1% by the financial year 2027. The brokerage also said that IndusInd Bank's stock is currently trading at 0.9 times its one-year forward book value per share (BVPS), which they consider to be attractive.Nomura also noted that the bank's board seems committed to better governance. A leadership change is expected in the financial year 2026, which may help steer the bank in a new direction.The Reserve Bank of India (RBI) has recognised the bank's efforts to improve, which adds some regulatory comfort for investors. There is also a possibility that RBI may approve a promoter stake hike, which could reduce concerns among shareholders.GOVERNANCE ISSUES AND RECOVERY EFFORTSIn recent months, IndusInd Bank has faced challenges due to governance and accounting-related issues. However, the bank has taken steps to fix these problems. This includes cleaning up its loan book and setting aside one-time provisions to deal with past issues.Nomura compared IndusInd Bank's situation to that of RBL Bank in 2021 and Yes Bank in 2018. Both banks went through similar leadership changes when concerns about asset quality were raised. While their short-term performance was weak at the time, they later saw a recovery once their financial position became strongerDespite recent troubles, Nomura pointed out that IndusInd Bank's capital and liquidity levels remain strong. The bank has a Common Equity Tier-1 (CET-1) ratio of 15.1% and a liquidity coverage ratio (LCR) of 118%. These numbers suggest the bank has a good buffer in case of financial stress. The brokerage also highlighted the bank's strong presence in the retail market, which may help it recover profitability faster.IMPROVED EARNINGS FORECASTNomura has raised its earnings per share (EPS) estimates for IndusInd Bank by 14% to 16% for the financial years 2027 and 2028. This upgrade is based on higher expected net interest income (NII) and lower credit costs.According to the new estimates, the bank's RoA could range from 0.8% to 1.1%, while return on equity (RoE) is expected to be between 7% and 10% for the period between FY26 and FY28.The market responded positively to Nomura's upgrade and new projections, leading to a 5% rise in the stock price.
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