Nomura has upgraded IndusInd Bank to a ‘Buy’ rating, elevating its target price from ₹700 to ₹1,050, reflecting newfound confidence in the bank’s governance reforms and strategic reset. This bullish shift follows a tumultuous period marked by corporate governance concerns, but also transformative leadership changes and robust regulatory support.
In its latest note, Nomura highlighted that legacy issues—including opaque derivative valuations and blurred internal accounting—are being systematically addressed. The bank appears committed to a “clean start” in FY26, with reforms in auditing, compliance, and executive accountability clearly underway.
A significant endorsement came from Ashok Hinduja, Chairman of promoter IIHL (IndusInd International), who publicly backed the board and pledged support for potential capital infusion, a reassurance to markets. On the governance front, RBI has granted in-principle clearance for IIHL to raise its stake back to 26%, underscoring building regulatory alignment and promoter commitment.
External scrutiny sparks structural cleanup
Regulatory oversight has intensified as part of the reset. The RBI appointed an interim executive committee led by Soumitra Sen and Anil Rao to stabilize operations during the leadership transition, a move both praised by Nomura and seen as crucial by the market. Additionally, the National Financial Reporting Authority has issued notices to the bank’s auditors, adding another layer of regulatory rigor.
Transparency on past accounting lapses has also improved. A forensic review, commissioned to investigate internal derivatives—and now in SEBI’s hands—revealed insider trading concerns, leading to an interim ban for former CEO Sumant Kathpalia and four others.
Nomura’s valuation road ahead
Nomura believes that with strong reform momentum, IndusInd Bank’s key operating ratios like RoA improving to 1% by FY27 and valuations at a modest 0.9x one-year forward BVPS, make it an attractive contrarian play. Moreover, RBI’s acknowledgement of the bank’s recovery efforts and formal approval of promoter stake increases alleviate some systemic risk, making this a compelling entry point.
Nomura stressed that the management’s proactive cleanup, capital adequacy buffer, and strong promoter backing establish a solid foundation for recovery in earnings and investor sentiment.
