Emkay Global Exits IndusInd Bank, Adds Power Finance Corporation

Emkay Global has removed IndusInd Bank from its model portfolio due to ongoing leadership uncertainty and governance concerns, replacing it with Power Finance Corporation (PFC), citing strong valuation metrics and growth prospects in the power sector.

The brokerage firm highlighted that while IndusInd Bank’s valuations appear attractive, it does not expect an immediate recovery, particularly amid the fallout from its derivatives accounting issue and an ongoing SEBI probe into potential insider trading.

Why Emkay Removed IndusInd Bank?

IndusInd Bank has been under pressure due to:

• Leadership uncertainty following governance concerns.

• Derivatives accounting lapses, raising doubts about financial transparency.

• SEBI’s insider trading probe, investigating five senior officials for alleged trading on unpublished price-sensitive information (UPSI).

While IndusInd Bank's stock showed a 2% gain on March 27, Emkay believes the risks outweigh the potential upside in the near term.

Why Did Emkay Add Power Finance Corporation (PFC)?

As a replacement, Emkay Global added PFC, citing:

• Attractive valuation, trading at 1x price-to-book value (P/BV).

• Bullish growth in India’s power sector, with rising electricity demand.

• Expansion moves by PFC’s subsidiary, PFC Consulting, including new special purpose vehicles (SPVs) for renewable energy and data center transmission projects.

PFC Consulting recently incorporated NES Dharashiv Transmission and NES Navi Mumbai Transmission, focusing on:

1. Dharashiv, Maharashtra – Renewable energy evacuation.

2. Navi Mumbai – Strengthening the power grid for data center growth.

SEBI Investigation Adds to IndusInd Bank's Woes

The Securities and Exchange Board of India (SEBI) is probing IndusInd Bank for insider trading related to:

• Trades by five senior officials suspected of using UPSI.

• Potential violations of disclosure norms, raising governance concerns.

This regulatory scrutiny has further clouded the outlook for IndusInd Bank, influencing Emkay’s decision to remove it from the model portfolio.

Market Reaction and Future Outlook

• IndusInd Bank shares saw a 2% gain on March 27 despite early declines.

• PFC shares have been rallying amid positive sentiment for the power sector.

• Investors are closely monitoring SEBI’s investigation, which could impact IndusInd Bank’s stock further.

With PFC’s solid fundamentals and power sector growth potential, Emkay Global’s portfolio shift aligns with a strategic move towards stability and long-term gains.

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