Mumbai, March 11 IndusInd Bank’s share price plummeted 27.06 per cent on Tuesday, closing at Rs 656.8 apiece, as the lender’s internal review projected an adverse impact of approximately 2.35 per cent on its net worth (as of December 2024).
The stock also hit a fresh 52-week low during the intra-day trading session, marking its fifth consecutive session of losses.
The sharp fall came after the private lender disclosed discrepancies in its derivatives portfolio.
As this drop was the steepest single-day fall in the bank’s history, around Rs 19,500 crore eroded from the bank’s market value.
With this decline, IndusInd Bank has lost nearly Rs 78,762 crore in market capitalisation since its peak in January 2024.
The bank’s net worth is expected to decline by nearly Rs 2,100 crore after accounting discrepancies of 2.35 per cent of its net worth were found in its derivatives portfolio during an internal review.
The Hinduja-promoted lender plans to absorb this loss in its Q4 earnings or the first quarter of the next fiscal year (FY26).
The internal review findings have sparked a string of target price cuts from several brokerages for the bank's stock amid fresh turmoil, days after the Reserve Bank of India allowed only a one-year extension to Chief Executive Officer, Sumant Kathpalia.
The bank has appointed PwC India, a leading consulting firm, to conduct an external review of accounting discrepancies found in its treasury book.
Reports suggest that PwC is expected to submit its findings within two to three weeks.
IndusInd Bank will face a "litmus test" from the succession viewpoint and the board is likely to evaluate both external as well as internal candidates, Citi said. Recent developments have raised the risk perception and impact disclosed borrowings cost too, it added.
“We downgrade IIB to ‘HOLD’ from ‘BUY’ as we cut multiple to 1.0x from 1.4x driven by uncertainties relating to earnings quality and future leadership. Woes continue for IIB since an irregularity was unearthed in derivative accounting,” said Gaurav Jani from PL Capital- Prabhudas Lilladher.
This discrepancy spanned across a 5-7 year period till March 31 2024, however, due to an RBI directive, there are no irregularities with effect from Apr 1 2024.
“In our view, this episode had a bearing on RBI’s decision to extend MD and CEO’s tenure only for 1 year. Valuation is 0.9x on FY27 ABV and we trim target price to Rs 1,000 from Rs 1,400,” said Jani.
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