IndusInd share price rises as bank denies merger reports

The share price of IndusInd Bank jumped more than 4 percent in intraday trade on BSE on October 26 after the private lender denied reports of its merger.

"The promoter of Indusind Bank, IndusInd International Holdings Limited (IIHL), completely denies the said rumour and considers it malicious, untrue and baseless," the bank said in a BSE filing on October 26.

"IIHL is promoted by the Hindujas and a broad base of other successful NRIs from the overseas Indian diaspora. They reiterate their full support to the IndusInd Bank, now and always," the BSE filing added.

While IndusInd Bank did not clearly mention which media reports it had referred to, some media reports said that Kotak Mahindra Bank was exploring the option of a takeover of IndusInd Bank.

The bank underscored in the BSE filing that its promoter has positively intervened to support and improve the financial position of the bank and they would continue to support the bank’s initiatives to grow inorganically.

At 1055 hours, shares of IndusInd Bank traded 2.56 percent up at Rs 623 on BSE.

Jaikishan Parmar, Senior Equity Research Analyst, Angel Broking said the rally in the stock price was primarily owing to inexpensive valuation.

"We believe most of the negative concerns have priced in and currently trading at a very low valuation compared to historical valuation. Apart from valuation, other reasons for the stock price to increase are promoter's commitment to invest in the bank and focus on beefing up provisioning buffers," said Parmar.

"Considering attractive valuation, a fresh infusion of capital and a gradual increase in PCR. However, investors need to closely watch fresh slippage percentage from the moratorium book and jump in GNPA from MFI book. We recommend investors to hold Indusind bank."

Chandan Taparia, Vice President and Analyst-Derivatives, Motilal Oswal Financial Services, said the stock could trade in a broader range of Rs 500-660.

"In the last three months, the stock has been trading in a range but the good part is that the support is visible. The broader range is likely to be Rs 500-660," Taparia said.

He suggested 'buy-on-decline' on the stock.

Raghav Garg, Research Analyst at Nirmal Bang Institutional Equities, said given the franchise and new business strategy, the stock's valuation was undemanding.

Re-rating was contingent upon delivery as per the guidance and new strategy laid out, Garg said.

The bank's management was open to upfronting provisions and recognising stress, which was positive, he said. Reducing dependence on bulk deposits and focusing on granularity was also a plus.

However, slippages and credit costs could remain elevated for some time. which was negative.

Nirmal Bang has a 'buy' call on the stock, with a target price of Rs 686.

Vinit Bolinjkar, Head of Research, Ventura Securities, said the current valuation of the stock was attractive. A sharp pullback was not expected. There would be a slow gain in the share price and future price action would be in accordance with the bank's performance, Bolinjkar said.

He recommended 'hold' based on the fact that the bank was expecting a slow advance growth in FY21 and asset quality risks on account of the impact of COVID.