While asset quality improved sharply, profitability fell short of expectations due to higher provisioning, elevated operating expenses and subdued loan growth.
The reaction has also been weighed down by a series of brokerage downgrades.
DAM Capital has cut its rating on the stock to ‘Neutral’ from ‘Buy’ and revised its price target to ₹400. Phillip Securities has also downgraded the stock to ‘Neutral’, lowering its target to ₹420 from ₹440.
In contrast, Macquarie has maintained an ‘Outperform’ rating with a price target of ₹455, despite flagging pressure on earnings.
The miss on profit was largely driven by a sharp rise in credit costs, which came in at 39 basis points against much lower expectations, primarily due to prudent provisioning.
This also led to an increase in the stage 1 provision coverage ratio. Loan growth remained muted at 3% year-on-year, with prepayments and resolutions weighing on overall assets under management and disbursements staying soft.
For the quarter, operating profit declined 19.4% year-on-year, while net profit dropped 20.6% and fell 16.8% sequentially. Margins narrowed to 3.5% from 4.4% a year ago.
On the asset quality front, gross and net NPAs improved to 0.24% and 0.12%, respectively, aided by reductions in stressed assets, including write-offs and resolution gains such as the Sinnar Thermal account.
Despite the near-term pressure, Street sentiment remains largely constructive, with 14 of the 15 analysts tracking the stock maintaining a ‘Buy’ rating and only one recommending ‘Sell’.
The stock was last trading at ₹361.70, down 3.75% on the day, and has corrected sharply from its peak, falling about 45% from its all-time high of ₹654.
