Shares of IndusInd Bank declined 3.5 percent on Wednesday, July 2, making it the top loser on the Nifty index after global brokerage Goldman Sachs downgraded the private sector lender to a ‘Sell’ from its earlier ‘Neutral’ rating. The brokerage cited structural concerns in the bank’s business model and pointed to weak franchise fundamentals.
Valuation Cut and Weaker Growth Outlook – Goldman Sachs
Goldman Sachs reduced its earnings projections for IndusInd Bank, slashing FY26 and FY27 earnings per share (EPS) estimates by 25 percent and 17 percent, respectively. The brokerage also revised its target price to ₹722 from an earlier ₹634, citing persistent challenges in the bank’s growth trajectory.
“Even after business normalisation in the second half of FY26 and FY27, IndusInd Bank will likely continue to face growth headwinds,” Goldman Sachs said in its report. It attributed this outlook to the bank’s market share loss in both loan and deposit portfolios, deteriorating revenue engines such as yields and fee income, and weakening operational controls.
Goldman Sachs also said that the bank’s Return on Assets (RoA) is expected to reset lower in the medium term, further limiting its valuation upside. “The bank’s franchise has weakened with declining productivity across branches and falling yields due to portfolio mix adjustments,” the brokerage noted. As a result, Goldman Sachs expects IndusInd Bank’s valuation to remain below its book value due to poor visibility on turnaround efforts.
Governance Issues and CEO Transition Weigh on Sentiment
Separately, investor confidence in IndusInd Bank has been rattled by governance concerns. The bank recently faced a $230 million hit for the year ended March 2025 due to long-standing misaccounting of internal derivative trades, which triggered the resignations of CEO Sumant Kathpalia and Deputy CEO Arun Khurana in April.
An internal audit of its microfinance vertical further revealed that nearly $80 million had been incorrectly classified as interest income across three quarters, which was reversed in January. These irregularities led to higher-than-expected losses in the March 2025 quarter, coupled with increased slippages in the microfinance business.
In the aftermath, the bank has reportedly shortlisted three senior executives—Rajiv Anand, Rahul Shukla, and Anup Saha—for the CEO post and submitted the list to the Reserve Bank of India (RBI) for approval.
Stock Performance
Following the downgrade, IndusInd Bank shares fell to an intra-day low of ₹848 on July 2. The stock is now over 43 percent below its 52-week high of ₹1,498.70, touched in September 2024. It had earlier hit a 52-week low of ₹605.40 in March 2025.
Over the past 12 months, the banking stock has fallen nearly 40 percent. While it posted a 6.7 percent gain in June, this came after a 2.5 percent drop in May. The stock had surged 29 percent in April, recovering partially from a sharp 34.5 percent decline in March, which was triggered by the financial irregularities and leadership exits.
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