IndusInd Bank shares now valued at par with mid-sized PSU Banks after ₹18,000 crore sell-off

With this fall, IndusInd Bank’s valuation is now at par with a lot of mid-sized state-run banks. At the current price, IndusInd Bank shares are trading at 0.71 times their 12-month forward price-to-book multiple. This made it the only private lender who trades at a multiple less than 1 times book.

In comparison to IndusInd Bank’s

current valuation multiple, state-run lenders like Bank of Baroda (BoB), Punjab National Bank (PNB) and Canara Bank are valued at 0.74 times book.

The decline in IndusInd Bank’s valuation is significant given the fact that it commanded a price-to-book multiple of nearly two times in January 2024. Shares of IndusInd Bank are down 56% from their peak post Tuesday’s call.

IndusInd Bank’s larger private peers, including HDFC Bank, ICICI Bank and Kotak Mahindra Bank are trading at 2.3 times to 2.5 times their one-year forward price-to-book multiple.

Interestingly, IndusInd Bank’s valuation has also dropped below that of smaller private peers like Federal Bank and IDFC First Bank. Notably, IndusInd Bank had a larger loan book of ₹3.7 lakh crore as of December 2024, compared to ₹2.3 lakh crore for Federal Bank and ₹2.2 lakh crore for IDFC First Bank.

The selloff in IndusInd Bank’s shares was triggered after the bank reported discrepancies in its derivatives portfolio and warned of a one-time impact on earnings. The bank revealed that incorrect derivative accounting had concealed a pre-tax loss of over ₹2,100 crore. This development comes shortly after the Reserve Bank of India (RBI) approved only a one-year term extension for the bank’s chief, in contrast to the board’s approval of a three-year extension.

Brokerage firm UBS, which had cut its price target on IndusInd on Monday to ₹850, cut its target on Tuesday as well to ₹770, which becomes the lowest on the street for shares of the lender.

UBS noted that the final impact will depend on an external review, while higher forward flows from the microfinance segment could keep credit costs elevated. “We cut our FY25 earnings estimate by 25% to factor in this loss (reducing book value by 2.5%), with downside risks to FY26/27 earnings,” the brokerage wrote in an investor note.