Sumant Kathpalia will take charge as the managing director and CEO of IndusInd Bank on March 24.

In a late evening stock exchange filing on February 27, the bank said that it had received a communication from the Reserve Bank of India (RBI) approving the appointment of Kathpalia, who currently heads the consumer banking business, for three years.

The tenure of Romesh Sobti, the current MD & CEO, ends on March 23. Under Sobti’s leadership IndusInd Bank’s share price grew over 11.2 times versus 2.26 times and 3.4 times growth in the S&P BSE Sensex and S&P BSE Bankex respectively. In terms of business, IndusInd Bank’s deposits and advances were at ₹22,110.25 crore and ₹15,770.64 in FY09—14 months after Sobti took charge. In FY19, the deposits and advances stood at ₹1,94,715 crore and ₹1,90,114 crore, respectively. In CAGR terms, the growth in deposits and advances was 21.87% and 25.4% over the last 11 years.

According to a report by four research analysts at Motilal Oswal Financial Services, the bank’s stock price has corrected steeply over the recent period owing to concerns about its asset quality, CEO succession, and adverse macro developments, particularly the Supreme Court ruling on the adjusted gross revenue issue. “RBI approval thus addresses one of the major overhang on the stock performance prompting us to assess the investment case as IndusInd Bank navigates through residual asset quality challenges,” the analysts wrote.

The banking career of Kathpalia—a chartered accountant by qualification—spans over three decades and has been associated with marquee names, including Citibank, Bank of America, ABN Amro. While he has diverse experience across crucial banking functions including business strategy, sales and distribution, operations, and risk and credit management, has been associated with IndusInd Bank since 2008.

His current portfolio—consumer banking division—accounts for nearly 54% of IndusInd Bank’s total loan book. Prior to joining IndusInd Bank, Kathpalia had spent eight years at ABN Amro, which was led by Sobti, and where Kathpalia was heading the foreign bank’s consumer banking division.

Overall, the fundamentals of IndusInd Bank (No. 59 on the Fortune India 500 list 2019) are moving in a positive direction. The Motilal Oswal report highlights that over the past two quarters, a bulk of corporate slippages came in from the BB-rated & below pool, the size of which has declined to 3.8% (7.9% in Q1 FY20) while the watch-list has declined to 0.47% of loans. “This pool is likely to drive elevated slippages over the near term as the bank recognizes the residual stress,” the report warns.

The analysts’ scenario analysis suggests that the potential slippages could impact FY21 average book value (ABV) in the range of 7%-10%, which they believe is manageable given IndusInd Bank’s strong earnings profile and capital ratios.

Accordingly, the analysts revised their growth, provisioning assumptions and lowered their FY21/22 estimates by 12%/9% respectively. “We turn constructive on the stock given undemanding valuations & maintain buy (rating) with a target price of ₹1,500 (a share),” the analysts wrote.

At the current market price of ₹1,141, on the report date, the target price of ₹1,500 foresees a 35% upside over the next 12 months. Meanwhile, on the BSE the stock opened 0.68% lower on February 28, at ₹1,108, compared to Thursday’s close of ₹1,115.6. At the day’s high and low, until 11.15 a.m., the stock traded 0.44% and 2.71% lower than the previous close at ₹1,110.75 and ₹1,085.4 respectively.

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