Emkay Global is upping its target on IndusInd Bank, read on
IndusInd Bank has had a rough few years. Microfinance stress, a derivatives fiasco, senior management exits, and a quarterly loss that shook investor confidence. The stock has shed 10.5% over the past 12 months even as the broader Nifty-50 gained 11.6%. At one point it touched a 52-week low of Rs605.
But Emkay Global thinks the worst is firmly behind it.
The Man at the Helm
Every turnaround story needs a protagonist. At IndusInd Bank, that person is Rajiv Anand, a veteran banker who arrived from Axis Bank in August 2025 to take charge as Managing Director following what Emkay describes as a “brief interregnum” after the previous management’s exit.
The report paints a frank picture of how the bank got here. Under Romesh Sobti, IndusInd underwent a sharp transformation over nearly a decade. But over time, the report notes, “the pursuit of a higher RoA resulted in higher risks, balance-sheet inefficiencies, and weaker governance.” His successor Sumant Kathpalia then faced a perfect storm — systemic shocks, microfinance stress, and the derivatives scandal — that ultimately resulted in losses and a leadership vacuum.
Anand’s mandate is clear: fix the foundations before chasing growth. According to Emkay, he is “rebuilding a senior leadership team with high integrity, strengthening credit-risk and HR functions, and rightfully integrating the asset-liability vertical in a ‘One IndusInd Bank’ framework.”
The Next Strategy
The business model reset is perhaps the most substantive part of the Emkay thesis.
IndusInd is pivoting away from being a self-employed and commercial-retail heavy lender — the model that generated high yields but also high risk — toward a more balanced bank with stronger consumer retail roots. The report identifies gold loans, affordable housing, and passenger vehicles as the growth engines on the asset side.
Critically, the bank is capping its microfinance exposure at 7-8% of the book, down from roughly 10% currently. MFI has been a persistent source of pain across the sector, and reducing concentration here is a meaningful de-risking move.
On the liability side, Emkay points to IndusInd’s branch network — described as stronger than Kotak Mahindra Bank’s — as an underutilised asset. The plan is to improve branch productivity to gather deposits at a lower cost of funds while reducing dependence on DSA-sourced business, which tends to be stickier and more expensive.
The mid-corporate and SME push is the other piece of the puzzle, designed to claw back current account deposits and rebuild the fee income moat.
The Numbers Case
FY26 is the trough. Net profit is expected to collapse to Rs6.2 billion — a near wipeout compared to Rs26.4 billion in FY25 — as the bank absorbs legacy provisions and restructuring costs. Return on assets is projected at just 0.1% for the year. Return on equity: 1%.
Then the recovery kicks in.
FY27 net profit is projected at Rs44.6 billion, with EPS growth of 617%. By FY28, net profit reaches Rs76.3 billion, RoA recovers to 1.3%, and the bank is on track for what Emkay describes as a sustainable 1.3-1.5% RoA and 1.6-2.0% RoRWA range by FY28-29.
“We expect the RoA to further improve to approximately 1.3-1.5% over FY28-29E, as the growth/asset-quality recovery gains further traction and thus drives a stock re-rating,” the report states.
Why Now?
At current levels, IndusInd trades at 1.3x FY28 estimated book value — a significant discount to peers like HDFC Bank and ICICI Bank, which command multiples of 2-3x. Emkay’s new target of Rs1,100 is based on 1.3x FY28E book value and 11x FY28E earnings, using a two-stage Gordon growth model.
The brokerage draws an explicit comparison to Federal Bank, which Emkay describes as also being “in the early stages of transformation” — a bank that has seen meaningful re-rating as its turnaround has gained credibility with the market.
The message is clear: if Rajiv Anand executes, the valuation gap closes. And the gap right now is wide.
Indeed, the brokerage has upgraded IndusInd Bank to buy from reduce while simultaneously raising its target price by 38% to Rs1,100 from Rs800. At the current market price of around Rs927, that implies upside of nearly 19%.
Emkay does not shy away from the downside. The upgrade comes with an important caveat baked in: “Further re-rating will be contingent on sustained execution of the management strategy and no asset-quality or regulations-based interruptions.”
