The global brokerage firm Goldman Sachs has given a ‘Sell’ rating on IndusInd Bank, citing structural weaknesses in the bank’s financial model and slowing growth momentum. As per the brokerage report, the stock could decline by nearly 18% over the next 12 months. The brokerage has also revised its target price to Rs 722 compared to its current market price of Rs 879.
Let’s take a look at the key reason why the brokerage is cautious on the stock –
Goldman Sachs on IndusInd Bank: Volatility and investor uncertainty
According to Goldman Sachs, IndusInd Bank’s stock has shown sharp swings in recent months, falling 23% from its February highs, but also rising 28% from its March lows. This fluctuation, as the brokerage report highlights the “value trap vs. value stock” debate currently surrounding the bank.
While some investors remain optimistic about improved performance under the new management, the brokerage takes a more cautious view. “We downgrade IndusInd Bank to Sell (from Neutral) as we see sharper cuts ahead,” the report noted.
Goldman Sachs on IndusInd Bank: Return ratios under pressure
The brokerage firm further in its report pointed out that IndusInd Bank’s return on equity (ROE) is expected to remain subdued at 8% over FY2-FY28, much lower than its estimated cost of equity at 17%, which raises concerns about the bank’s profitability outlook.
The brokerage believes this mismatch may persist even beyond FY26, as the bank faces multiple challenges. These include margin compression, high funding costs, and lower yield profiles due to a shifting loan mix.
Goldman Sachs on IndusInd Bank: Earning forecast slashed
In its revised projections, Goldman Sachs has cut IndusInd Bank’s earnings per share (EPS) estimates by 25% for FY26 and 17% for FY27. This is driven by expectations of “persistent margin pressure amid a weaker yield trajectory and elevated funding costs.”
The brokerage added, “Our estimates are now 26%/10% below the Visible Alpha consensus.”
Goldman Sachs on IndusInd Bank: Loss of market share
One major reason behind the downgrade is the bank’s declining market share in key segments. According to the report, IndusInd is losing ground both in loan portfolios and deposits, at a time when the broader banking sector is expected to see a recovery in growth and return on assets (ROA) from the second half of FY26.
The brokerage house in its report noted, “IndusInd’s franchise has weakened…with its key revenue drivers deteriorating such as yields due to its portfolio mix, fee income, and productivity of its branches.”
Goldman Sachs on IndusInd Bank: Structural shifts in business mix
Another reason noted by the brokerage is that IndusInd’s margins are its increased reliance on lower yield segments. Products like Microfinance (MFI) and vehicle loans (Wheels) which make up 25% of the bank’s loan book as of FY25 are facing slower growth.
Furthermore, the report also noted that the bank may see “limited benefit in cost of deposits” going forward, which may further impact profitability.