IndusInd Bank Shares Crash 20% to 52-Week Low Amid ₹2,000 Crore Derivatives Discrepancy

IndusInd Bank, one of India's prominent private sector lenders, recently experienced a significant setback as its shares plummeted 20%, reaching a 52-week low. This sharp decline follows the bank's disclosure of accounting discrepancies in its derivatives portfolio, leading to an anticipated net worth reduction of approximately ₹2,000 crore.

During an internal review, IndusInd Bank identified discrepancies in its derivatives transactions spanning the past five to seven years. These irregularities are expected to erode about 2.35% of the bank's net worth as of December 2024, translating to a financial impact between ₹1,600 crore and ₹2,000 crore. The bank has engaged an external agency to independently validate these findings and plans to account for this one-time loss in either the current quarter or the next fiscal year's first quarter.

The market reacted swiftly to this revelation, with IndusInd Bank's stock hitting its lowest point since November 2020. Analysts express concerns over the robustness of the bank's internal controls and compliance mechanisms. Macquarie, in a note, highlighted that such issues raise questions about the effectiveness of the bank's internal processes. Furthermore, Jefferies analyst Prakhar Sharma anticipates a one-time hit to the bank's earnings for the 2024-25 fiscal year and suggests that this incident could lead to a de-rating of the bank's shares.

This development adds to the challenges faced by IndusInd Bank, which recently reported a 39% decline in its December quarter standalone net profit, amounting to ₹1,401 crore. The bank's net interest income also saw a decline, and net interest margins contracted to 3.93% from 4.29% in the previous year.

In response to these events, IndusInd Bank has assured stakeholders of its commitment to resolving the discrepancies and strengthening its internal controls. The bank's management emphasizes that its profitability and capital adequacy remain robust enough to absorb this one-time impact.

As the situation unfolds, investors and stakeholders will closely monitor IndusInd Bank's corrective measures and their effectiveness in restoring confidence in the institution's financial health and governance practices.