This bank posted a profit growth of over 50% in its latest quarter, but a rise in fresh bad loans played spoilsport for IndusInd. Its gross and net NPA jumped to 1.12% and 2.19% from 0.48% and 1.09% last year. But analysts believe that exposure to stressed assets is manageable. “Inclusive of the current reported stress, where the management seems quite confident on a much lower final haircut, the risk-reward seems much better than earlier,” states a Jefferies report.
Even so, another challenge that the company is facing is the fact that its CEO Romesh Sobti, who successfully led the turnaround at the bank, is set to retire in March next year. As he prepares to leave, he has been selling stake in the bank, offloading shares worth 108 million in two tranches on November 8 and 20. His stake currently stands at 0.12% (worth 1.23 billion), slightly lower from 0.13% before this sale. This brings the total stake offloaded to 1.26 billion over the past three years. Sobti isn’t the only one selling. IndusInd insiders have sold stock worth 2.28 billion over the past year.
Mutual funds, though, are increasing their stake, which has risen to 12.64% from 9.22% in June. SBI Mutual Fund, Kotak Mutual Fund and UTI Mutual Fund have upped their holdings from 1.41%, 0.52% and 1.41% to 1.84%, 1.70% and 1.64%, respectively since March this year. Foreign portfolio investors have increased their stake marginally to 52.1% from 51.47% in June. Europacific Growth Fund and Government of Singapore has upped their holdings from 1.73% and 1.33% to 3.21% and 1.94%, respectively.
While there is uncertainty over succession plans at the bank, reports indicate that the bank has finalised a decade-old hand at IndusInd and head of consumer loans, Sumant Kathpalia. With the overall market rebound, the stock, has recovered from its 52-week low of 1,192 to 1,446. But it’s some way off its 52-week high of 1,835. The leadership transition is being closely watched by investors. An HDFC Securities (Institutional) report states, “Its top-drawer private banking franchise is intact, and even if challenged,we believe IndusInd has the capability to pull back from this slip. A smooth leadership transition amidst the stress buildup will help immeasurably.”