IndusInd Bank share price dips 18% after Q2 results. Should you buy, sell or hold?

In the second quarter, IndusInd Bank's net profit plunged 39% year-on-year to Rs 1,325 crore, falling significantly short of what the market had expected. In comparison, the profit stood at Rs 2,181.47 crore in the same quarter a year ago.

In Short

• IndusInd Bank shares tumble nearly 18% after Q2 results
• Net profit plunges 39% YoY, missing market expectations
• Analysts remain cautious, citing weak asset quality and earnings

Shares of IndusInd Bank tumbled nearly 18% in early trade after reporting its financial results for the second quarter. The shares of the bank were down 17.73% to Rs 1,052.15 on the Bombay Stock Exchange (BSE) at 10:21 am.

In the second quarter, IndusInd Bank’s net profit plunged 39% year-on-year to Rs 1,325 crore, falling significantly short of what the market had expected. In comparison, the profit stood at Rs 2,181.47 crore in the same quarter a year ago.

Despite the sharp profit decline, the bank’s net interest income (NII) showed modest growth, rising by 5% year-on-year to Rs 5,347 crore. However, net interest margin (NIM) contracted to 4.08%, a drop of 21 basis points (bps) from 4.29% a year ago, and 18 bps lower on a quarter-on-quarter basis.

Asset quality also deteriorated during the quarter. Gross non-performing assets (NPA) increased to 2.11%, while net NPA rose to 0.64%, compared to 1.93% and 0.57% respectively in the same period last year.

BUY, HOLD OR SELL?

Brokerage firm Jefferies continues to recommend a 'Buy' on IndusInd Bank but has lowered its target price from Rs 1,750 to Rs 1,470.

Weaker asset quality and rising provisions have hurt profitability, and softer lending activity has impacted the bank's topline.

Jefferies expects these pressures to persist through FY25, with a potential recovery in FY26-27.

The brokerage has also cut earnings estimates by 13-25%.

Nomura has kept its 'Neutral' rating on the stock, reducing its target price from Rs 1,580 to Rs 1,220.

The bank's weak quarterly performance and challenging outlook are likely to weigh on returns, with the expected Return on Equity (RoE) downgraded to 11-13% for FY25-27 from the previously anticipated ~14%.

Nomura has also slashed EPS forecasts for the same period by 14-22%, citing lower loan and deposit growth as well as weaker NIMs.

Nuvama has downgraded IndusInd Bank to 'Hold' from 'Buy' and cut its target price to Rs 1,290 from Rs 1,690.

Deteriorating asset quality, particularly in the MFI sector, where the 30-day past due (30DPD) rate rose to 4% from 2% QoQ, contributed to the downgrade. The bank also saw a QoQ decline in NII, with fee income remaining weak.

IIFL has revised its recommendation from 'Buy' to 'Add', reducing the target price to Rs 1,300 from Rs 1,590.

The downgrade was driven by a miss on key performance metrics, particularly the decline in NIMs due to slower growth in high-yielding segments. The bank is also expected to face higher credit costs in the near term, and IIFL has lowered its FY26-27 estimates by 9-14%.

While analysts have mixed views on IndusInd Bank’s outlook, most suggest a cautious approach in the short term, considering the current weakness in asset quality and earnings.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)