IndusInd Bank share price crashes 26% to 52-week low after reporting net worth hit of ₹1,500 crore
- IndusInd Bank said it expects a 2.35% decline in its net worth as of December 2024 due to discrepancies in its derivative trades, which were not in compliance with rules enforced by the Reserve Bank of India from April 2024.
IndusInd Bank share price plunged nearly 26% Tuesday, after the private lender warned about a 2.35% decline in its net worth due to discrepancies in its derivative accounts. IndusInd Bank shares touched a 52-week low of ₹668.80 apiece on the BSE, crashing as much as 25.73%.
IndusInd Bank, the country’s fifth-largest private sector bank, said it expects a 2.35% decline in its net worth as of December 2024 due to discrepancies in its derivative trades, which were not in compliance with rules enforced by the Reserve Bank of India from April 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. The Bank's profitability and capital adequacy remains healthy to absorb this one-time impact,” IndusInd Bank said in a regulatory filing on March 10.
The trades relate to a period 5 – 7 years before 1 April 2024. The hit will have to be reversed through income statement, mostly through Non-Interest Income (NII), and will be done in Q4FY25.
The time line for the update is discomforting as recently, IndusInd Bank CFO resigned just before the Q3 earnings, and the CEO has received a one-year extension instead of three.
What should investors do?
IndusInd Bank shares crashed more than 27% in five trading sessions.
Given the back-to-back adverse events, including shorter term for MD and unveiling of past accounting discrepancies impacting FY25 RoA and net worth, Emkay Global downgraded IndusInd Bank shares to ‘Add’ from ‘Buy’, and slashed IndusInd Bank share price target 22% to ₹875 from ₹1,125, now valuing the bank at 1x FY27E revised ABV (earlier 1.2x).
“We believe IndusInd Bank stock price should react adversely in the near term, to the recent events as well as to the elevated stress in MFI and hence remain under pressure. However, we recommend ADD from the medium-to-long term perspective, taking comfort from the reasonable valuations for a bank capable of delivering higher RoA (1.4-1.6%) over FY26-27E as the asset quality tide takes a turn for the better,” said Anand Dama, Senior Research Analyst at Emkay Global Financial Services Ltd.
Brokerage firm Nuvama Institutional Equities noted that IndusInd Bank has faced multiple negative events in FY25 including MFI stress, resignation of CFO, only a one-year extension for the CEO instead of three, and now this news.
“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,” Nuvama said.
Given low visibility on succession and earnings (MFI stress, derivatives and change of guard), it downgraded IndusInd Bank stock to ‘Reduce’ and cut its target price to ₹750, valuing it at 0.8x BV FY26E from 1.1x earlier.
On the technical front, IndusInd Bank share price has broken its crucial weekly support of ₹923 with a gap-down move, testing the major support at ₹740, noted Anshul Jain, Head of Research at Lakshmishree Investment and Securities.
“A weekly close below this level could accelerate the decline toward ₹551.45, a significant long-term support. The daily and weekly 10, 20, and 50 EMAs (Exponential Moving Average) remain negative and show strong momentum, limiting any meaningful upside. While short-term bounce-backs are possible, the broader trend remains bearish,” said Jain.
He suggests traders to watch for price action around ₹740, as failure to hold could trigger sharp selling.
“With momentum firmly downward, ₹551.45 appears to be the next likely target in the coming sessions,” Jain added.
At 10:10 AM, IndusInd Bank shares were locked at 20% lower circuit of ₹720.50 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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