Karnataka Bank Share Price Target Now Rs 220: Emkay Explains the Downgrade

Brokerage firm Emkay Global Financial Services has downgraded Karnataka Bank from ‘Buy’ to ‘Add’ and sharply reduced its target price by 15% to Rs 220, citing growing uncertainty after the resignation of the lender’s top two executives and emerging governance concerns.

“We change our rating to ADD from Buy for Karnataka Bank (KBL) and cut our TP by 15% to Rs 220,” noted Emkay in its report.

The rating revision comes as Karnataka Bank’s MD & CEO Srikrishnan Hari Hara Sarma and Executive Director Sekhar Rao tendered their resignations, according to Emkay Global. Sarma, who joined the bank in June 2023 for a three-year term, will step down on July 15, while Rao will exit on July 31.

“These exits reportedly followed board-level differences over a Rs 15.3 million consultancy spend flagged by auditors in May-25 which exceeded the directors’ delegated authority and was not ratified, making it recoverable from the directors. We believe this could be just another reason for the friction gradually building up between the new management and the Board,” according to Emkay Global.

Emkay’s report also noted that the sudden leadership churn threatens to derail the bank’s ongoing transformation into a “digitally agile”, “retail-focused institution”—an agenda spearheaded by Sarma. Under his leadership, Karnataka Bank had raised Rs 1,500 crore in fresh capital, boosting its CET-1 ratio to 18.4% by the end of FY25, and launched sweeping changes across technology, portfolio mix, and organisational structure.

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“Srikrishnan Hari Hara Sarma, a seasoned banker, was Karnataka Bank’s first external MD and CEO, appointed in Jun-23 for a three-year term, with an aim to transform KBL into a new-age, retail-oriented entity. Sarma had also launched a major digitalization and retailization drive in the bank which could now be disrupted, in our view, and thus hurt growth,” as per the analysis by Emkay.

However, with both the MD and ED set to depart within weeks, Emkay warns that the bank now faces a vacuum at the top at a critical juncture. Reflecting this, the brokerage has cut its earnings forecasts for the lender by 6–13% over FY26–FY28 and revised its valuation multiple to 0.6x June 2027E adjusted book value, down from 0.8x based on March 2027E.

Adding to the challenges, the bank recently reported cross-border UPI transaction discrepancies worth Rs 19 crore, prompting the appointment of a forensic auditor in April—a separate development that may further weigh on sentiment.

Still, Emkay remains cautiously optimistic. It believes that with the right leadership appointment, Karnataka Bank could continue along its transformation path.

Shares of Karnataka Bank Ltd fell sharply on Monday, dropping 5.77% to Rs 195.97 on NSE, after the sudden resignations of the bank’s top leadership sparked concerns among investors. Today, the company's stock is trading at Rs 196.40, up by 0.37% from the previous day's close.