IndusInd Bank’s stock has been placed under short-term Additional Surveillance Measure (ASM) – Stage 1 by the National Stock Exchange (NSE) due to a 30% fall in its share price after the bank reported accounting discrepancies in its derivatives portfolio. The fall follows the bank’s disclosure of a Rs 1,577 crore net worth hit due to an accounting gap, which has raised concerns over governance and earnings visibility. The bank’s Managing Director’s one-year extension instead of the usual three-year term has also negatively impacted investor sentiment, with most traders steering clear of the stock. Multiple broking firms have downgraded the stock and slashed target prices, while one global brokerage firm, CLSA, has taken a contrarian stance, maintaining an ‘Outperform’ rating and setting a target price of Rs 900.
Today, IndusInd Bank shares ended at Rs 672.65 on the NSE, down by Rs 12.05 or 1.76%.
IndusInd Bank shares have seen a sharp decline, losing 30% of their value over the past week. The slump follows the Managing Director’s one-year extension, shorter than the usual three-year term, along with the disclosure of a Rs 1,577 crore net worth hit due to an accounting gap. As a result, investor sentiment on Dalal Street has turned negative, with most traders steering clear of the stock.
The private lender had on Monday informed the exchanges that an internal review has estimated an adverse impact of approximately 2.35% of the bank’s net worth as of December 2024.
The review was undertaken following Reserve Bank of India’s (RBI’s) master directions on derivative portfolio of lenders, issued in September 2023. The review was related to ‘Other Asset and Other Liability’ accounts of the portfolio and the lender noted some discrepancies in these account balances.
The RBI Master Direction – Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023 was in effect from April 1, 2024. “Bank’s detailed internal review has estimated an adverse impact of approximately 2.35% of 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 of the external agency is awaited and basis which the Bank will appropriately consider any resultant impact in its financial statements,” a company statement issued on Monday said.Following the disclosure, multiple brokerages downgraded the stock and slashed target prices following an accounting discrepancy in its forex derivatives portfolio. The bank disclosed a potential Rs 15.8 billion post-tax hit, equivalent to 2.35% of its net worth, raising concerns over governance and earnings visibility.
Pointing out that it reflects poorly on internal controls, ICICI Securities said the hit is likely to run through P&L, and the bank could even report a loss in Q4FY25.
Nuvama also downgraded IndusInd Bank to ‘Reduce’ from ‘Hold’ and cut its target price to Rs 750, citing credibility concerns following multiple negative developments, including the CFO’s resignation, the CEO’s short tenure extension, and now the forex derivative markdown. The brokerage expects continued earnings pressure.
However, global brokerage firm CLSA has taken a contrarian stance, maintaining an ‘Outperform’ rating and setting a target price of Rs 900—31% higher than Wednesday’s closing price.