IndusInd Bank Share Price Highlights: Stock tanks 27% on accounting gaps; brokerages downgrade private lender

IndusInd Bank Share Price Live Updates: IndusInd Bank's shares were set for their biggest decline ever on Tuesday after the private lender disclosed discrepancies in its derivatives accounting.

The shares, which have been the worst performers on the Nifty 50, dropped by as much as 27% to their lowest point since November 2020. On BSE, the stock settled at ₹655.95 and on NSE at ₹656.80.

IndusInd Bank Share Price Live Updates: IndusInd Bank share price extended losses in trade today. The stock dropped 27% over its previous closing price to hit a low of ₹654, a level last seen in November 2020.

IndusInd Bank Share Price Live Updates: Life Insurance Corporation of India is among the top shareholders of the private lender, holding 3,77,37,210 shares or 5.23% stake as of the December quarter.

IndusInd Bank Share Price Live Updates: IndusInd Bank stock has lost 57% over the last one year while the stock is down 53% in the past six months. On a shorter time frame of three months and one month, the stock has lost 31% and 37%, respectively, according to Trendlyne data.

We downgrade IIB to REDUCE from BUY. We revise our Fair Value to ₹850 (from ₹1,400). We cut our FY2025E earnings by ~25% to reflect the recent development. Our investment thesis was based on improvements in asset-quality ratios, the removal of CEO uncertainty, and overall financial improvements. However, we acknowledge the disappointment of today's announcement and expect it to have a bearing on the stock's near-term performance. We will await a better entry price to turn constructive.

– Views by Kotak Institutional Equities

IndusInd Bank Share Price Live Updates: While the financial impact of the discrepancy might be minimal, the issue has raised concerns about credibility, said the brokerage Kotak Institutional Equities (KIE). 

“Trust is a crucial part of any investment thesis, and it may take some time to rebuild this trust and make the stock investable again. In the interim, we do not want to see any fresh negative outcomes emerge, as the bank has already seen negative events, resulting in significant underperformance. We look forward to the board's future course of action in assessing these events and implementing measures to prevent any such recurrence in the future,” said the brokerage.

On the positive side, if there is a sharp improvement in financials, particularly with better asset-quality performance in the MFI portfolio, it could help mitigate the current concerns, the brokerage said. In addition, if there are fewer worries about deposit growth and adequate liquidity available for growth, investors might eventually view this event as a less significant error, it added.

IIB’s stock has been on a downward trajectory, facing multiple setbacks, including weakened operating performance and the MD receiving only a one-year term vs a three-year regular term proposed by the board. 

The recent accounting discrepancies related to derivative transactions have further dampened sentiments and are likely to drive losses in 4QFY25 as the bank absorbs the impact through its P&L. We expect the stock to react negatively to this development. 

However, we believe the board will expedite the process of evaluating both internal and external candidates for a suitable successor, which should help alleviate concerns and improve confidence in the bank’s operations. We are downgrading the stock to Neutral with a revised TP of INR 925.

IndusInd Bank Share Price Live Updates: Shares of IndusInd Bank tanked 25% and were poised for their worst fall ever. The fall can be attributed to discrepancies in accounting related to forex derivatives that could lead to a one-time hit to earnings.  

IndusInd Bank Share Price Live Updates: During an internal review of processes relating to other asset and other liability accounts of its derivative portfolio, post-implementation of RBI’s new regulations effective 1 Apr’24, IIB noted discrepancies in these account balances.

IndusInd Bank mentioned that derivative positions pertain to foreign currency deposits/borrowings conversion. In simple words, while the MTM on external hedge was reflecting the true picture, the internal hedge had a different methodology, leading to the bank over-reporting NII/trading gains and thus overall profits. 

The discrepancy was visible in cases where the actual tenure of the internal and external legs was not similar due to premature rundown. Since 1 Apr’24, IIB has stopped the internal hedging, and post that, around Sep’24, it identified the discrepancies. We believe this reflects poorly on internal controls. The hit is likely to run through P&L, and the bank could even report a loss in Q4FY25.

Views by ICICI Securities

IndusInd Bank Share Price Live Updates: Four of the 38 analysts covering IndusInd Bank have given it a "sell" rating, the highest number in at least two years, according to data from LSEG. On average, the analysts have a "buy" rating.

(Source: Reuters)

“The past year has been challenging for IIB. The outcomes have been less than desired and marred by event risks. This was reflected in price movement with more than 30% correction in the past six months. We have yet to prune our earnings estimates, but this event does create challenges around potential downside revision. Given the uncertainty, we downgrade IIB to Sell from Accumulate with a lower TP of INR 830 from INR 1,020 based on 0.8x (from 1.0x) FY27E P/BV,” said Elara Securities.

IndusInd Bank Share Price Live Updates: IIB has faced multiple negative events in FY25, including MFI stress, resignation of the CFO, only a one-year extension for the CEO instead of three, and now this news, said Nuvama Research.

 “A negative derivatives’ disclosure has the potential to unnerve investors more than a back-dated NPL disclosure. The CEO explained the Board would consider internal and external candidates as part of succession planning. Given low visibility on succession and earnings (MFI stress, derivatives, and change of guard), we are downgrading the stock to ‘REDUCE’ and cutting the TP to INR 750/0.8x BV FY26E (from 1.1x earlier),” it added.

Last week, IndusInd Bank on Friday, March 7, announced that Sumant Kathpalia has been appointed as the Managing Director & CEO of the bank for a further period of one year with effect from March 24, 2025, till March 23, 2026. This marked the second instance when the MD’s term extension was shorter than the board’s proposal. 

The RBI’s extension for a one-year term to incumbent MD & CEO will keep uncertainties lingering around the potential leadership transition, as per experts. This had prompted many brokerages to lower the stock rating and cut target prices on Monday.

IndusInd Bank Share Price Live Updates: The bank said that they wanted to give out a best-case estimate of the impact; hence, it was not disclosed during the Q3FY25 earnings call. The RBI is aware of the issue. The loss is not related to the diamond business or any other lending segment; it is related to balance sheet borrowings.

(Source: Nuvama Research)

Prior period internal trades to inflict pre-tax loss of INR 21bn. IIB disclosed it used internal derivative trades against its foreign currency borrowings as well as deposits up to 31 March 2024 (stopped w.e.f. 1 April 2024). The bank in Q2/Q3FY25 found a gap, amounting to 2.35% of net worth—or INR 21bn pre-tax and INR 15.8bn post-tax. 

The trades relate to a period 5–7 years before 1 April 2024. The hit will have to be reversed through the income statement, mostly through NII, and will be done in Q4FY25E. The gap came up in an internal review, and the bank appointed an external auditor in Q3FY25, whose report will be out by the end of March 25.

IndusInd Bank Share Price Live Updates: During the internal review of processes relating to Other Asset and Other Liability accounts of the derivative portfolio, post-implementation of RBI Master Direction - Classification, Valuation, and Operation of Investment Portfolio of Commercial Banks (Directions), 2023, issued in September 2023, including accounting of derivatives, applicable from April 01, 2024, the bank noted some discrepancies in these account balances. The bank's detailed internal review has estimated an adverse impact of approximately 2.35% of the bank’s net worth as of December 2024. The bank has also, in parallel, appointed a reputed external agency to independently review and validate the internal findings. A final report from the external agency is awaited, and based on this, the bank will appropriately consider any resultant impact in its financial statements. The bank's profitability and capital adequacy remain healthy to absorb this one-time impact.

IndusInd Bank Share Price Live Updates: IndusInd Bank share price tanked 20% to their lower price band of ₹720.50 apiece on the BSE today after the company informed exchanges that it has noted some discrepancies in its derivatives account balances.