IndusInd Bank shares: JM Financial cut target price; here’s why

Brokerage JM Financial has downgraded IndusInd Bank to 'Reduce' from 'Hold', citing an uphill task ahead. The brokerage also lowered its target price to Rs 775 from Rs 800, following the bank’s weak second-quarter FY26 results, which showed a net loss of Rs 440 crore.

The disappointing performance was driven by a deliberate balance sheet consolidation and asset quality pressure. Loans and deposits fell around 9 per cent and 6 per cent year-on-year, respectively, while a higher-than-expected credit cost of ~3.2 per cent pushed operating performance 21 per cent below JM Financial’s estimates.

JM Financial highlighted the bank’s ongoing “force clean-up of book”, with challenges most acute in the microfinance (MFI) portfolio, where annualized gross slippages surged to ~15 per cent, resulting in Rs 15.8 billion in MFI loan write-offs for the quarter. Slippages in other retail segments, including vehicle finance, also remained elevated.

Profitability took a hit, with Net Interest Margin (NIM) contracting by 14 basis points quarter-on-quarter. The bank’s management outlined a strategic roadmap to strengthen risk management, collections, underwriting processes, and leadership structure.

While JM Financial sees these steps as structurally positive in the long term, it cautioned that they could weigh on growth and RoE in the near to medium term, leading to a sharp cut in earnings estimates for FY26-27 by 18 per cent-70 per cent.

Looking ahead, the brokerage projects a negative loan CAGR of -5 per cent between FY25 and FY28, and expects the bank’s average RoE to remain around 6 per cent over FY26-28. The revised target price of Rs 775 implies a 0.9x multiple on FY27 estimated Book Value Per Share (BVPS).