LIC loses over ₹900 crore as IndusInd Bank share price crashes 27% to nearly 5-year low

IndusInd Bank share price crash: A rout in shares of private sector lender burnt a hole in India's biggest life insurer and domestic institutional investor Life Insurance Corporation's (LIC) portfolio, resulting a loss of over ₹900 crore for the insurer.

IndusInd Bank's share price crashed 27% on Tuesday, March 11, to its lowest level since November 2020, after the lender flagged accounting discrepancies in its derivatives portfolio, which is likely to have a one-time impact on its earnings.

What's behind the fall in IndusInd Bank shares?

During an internal review of processes related to other asset and other liability accounts in its derivative portfolio, following the implementation of RBI’s new regulations effective from 1st April 2024, the bank identified discrepancies in these account balances.

The bank's internal review has estimated a negative impact of approximately 2.35% of its net worth. According to ICICI Securities' estimates, this impact is on a post-tax basis, translating to around ₹2,000-2,100 crore in absolute terms.

The hit is likely to be routed through P&L in Q4FY25, which it believes could severely dent reported profitability, with the possibility of a loss in Q4FY25.

The stock has been one of the worst Nifty 50 performers, losing over 55% in the last one year. Apart from the recent blow, the bank is grappling with several other challenges, including weakened operating performance and the MD receiving only a one-year term vs a three-year regular term proposed by the board.

These headwinds prompted several brokerages to downgrade IndusInd Bank stock and lower their target prices. According to a Reuters report, 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.

How much LIC lost amid rout in IndusInd Bank shares?

The selloff in bank stocks hit LIC too, which holds a 5.23% stake in the company. LIC's value of IndusInd Bank shares declined by ₹923.24 crore as the stock hit its lowest level in five years.

As of the closing level of ₹655.95, LIC's stake was valued at ₹2,475.33 crore as against ₹3,398.61 crore as of Monday's close.

Not just LIC, but several other mutual fund houses like Kotak Mutual Fund, ICICI Prudential Mutual Fund, UTI MF and Franklin India also hold stake in the Nifty 50 company.

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