IndusInd Bank share price trades flat after Sebi bars former CEO, four others from securities market for insider trading

IndusInd Bank share price traded flat on Thursday after capital markets regulator Sebi barred the company’s former CEO Sumant Kathpalia, and four other senior officials from accessing the securities markets in connection with an alleged insider trading in the bank’s shares. IndusInd Bank shares opened marginally lower at ₹803.05 apiece as against its previous close of ₹804.75 per share on the BSE. IndusInd Bank share price gained as much as 0.73% to ₹810.60 apiece.

The Securities & Exchange Board of India (SEBI) has also impounded ₹19.78 crore collectively from the five individuals.

The other officials of IndusInd Bank restrained by the regulator for alleged insider trading are former executive director and deputy CEO Arun Khurana, treasury operations head Sushant Sourav, global markets group (GMG) operations head Rohan Jathanna, and Anil Marco Rao, chief administrative officer of consumer banking operations.

“There is no impact on the financial, operation or other activities of IndusInd Bank arising out of the Interim Order,” IndusInd Bank said in a regulatory filing on Wednesday.

Sebi Order

According to the interim order passed by Sebi, it was found that these senior executives allegedly traded in IndusInd Bank shares while in possession of unpublished price-sensitive information (UPSI) related to discrepancies in account balances of the bank’s derivative portfolio. By doing so, they violated insider trading regulations.

The case originated from a Master Direction issued by the Reserve Bank of India (RBI), which had a significant operational and financial impact on IndusInd Bank.

Sebi noted that the internal team of the bank was aware of the financial implications due to discrepancies in the derivative portfolio and had already begun calculating the impact internally.

The bank informed its executives that the estimated financial impact stood at ₹1,749.98 crore.

In an email dated 4 December 2023, Kathpalia acknowledged the seriousness of the matter — an event the Sebi identified as the point of origin for the unpublished price sensitive information (UPSI).

Despite this, IndusInd formally classified the information as UPSI only on 4 March 2025 and disclosed it publicly on 10 March 2025 via a stock exchange filing — over 15 months after the information first emerged.

As of December 2024, IndusInd’s net worth stood at ₹65,101.65 crore. The eventual disclosure led to a material impact of approximately ₹1,529.88 crore.

Sebi’s investigation further revealed that five senior executives collectively sold 479,000 IndusInd Bank shares between December 2023 and March 2025. Importantly, no purchases were made by these individuals during this period, which Sebi interpreted as indicative of deliberate and strategic offloading.

IndusInd Bank’s average share price in December 2023 stood at ₹1,541.75, with the stock reaching a high of ₹1,618.90 on 28 December 2023. Following the disclosure, IndusInd Bank share price plummeted to a 52-week low of ₹605.40 on 12 March 2025. This marked a decline of more than 60% from the period during which the executives offloaded the shares to the point of public disclosure.

In its order, Sebi noted that noticee nos. 1 to 5 (five officials) traded in the scrip of IBL while being insider and accordingly barred them “from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders.”

On April 29, CEO Kathpalia and Deputy CEO Khurana resigned from the bank. Following their exit, the IndusInd Bank Board appointed a Committee of Executives to oversee daily operations until a new MD & CEO takes charge or for a period of three months, whichever is earlier.

Impact on IndusInd Bank Q4 Results

The fraud-hit private sector lender reported a loss of ₹2,329 crore for the quarter ended March 2025, its worst performance ever, as the interim management opted to go for a deep-clean exercise beyond recognising the impact of wrong accounting practices.

In the March quarter, the bank took impact of all the irregularities brought to the notice, including a ₹1,960 crore hit from incorrect recognition of derivative trades, cumulative interest income reversal of ₹674 crore due to incorrect accounting, disclosed a ₹172 crore fraud where employees had led it to incorrectly classify the amount as fee income under the microfinance business, set off ₹595 crore of incorrect manual entries posted as "Other Assets" and "Other Liabilities" in the past, and also recognized the higher slippages.

The internal audit report of the bank revealed “involvement of senior Bank officials, including former Key Management Personnel (KMP), in overriding key internal controls”. The bank reported the likely involvement of senior management in the accounting fraud to the Central Government.

IndusInd Bank share price has fallen 19% in three months and 17% YTD. Over the past one year, IndusInd Bank shares have declined 45%, while the stock is down 13% in three years.

At 9:25 AM, IndusInd Bank share price was trading 0.53% higher at ₹809.05 apiece on the BSE.

(With inputs from PTI)

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