IndusInd Bank stock plunges 23 percent to 52-week low after derivatives portfolio discrepancies

IndusInd Bank shares dropped 23 percent, hitting a 52-week low, after revealing discrepancies in its derivatives portfolio, with an estimated impact of Rs 1,500 crore.

IndusInd Bank shares plunged by 23% in early trade on Tuesday, hitting a 52-week low, following the private lender's disclosure of discrepancies in its derivatives portfolio. The stock extended its losing streak for the fifth consecutive session, becoming the biggest drag on the Sensex.

On the BSE, IndusInd Bank’s stock tanked 22.8%, reaching the lower circuit at ₹695.25 per share, marking its lowest level in the past year. Similarly, the stock plummeted by 21.67% on the National Stock Exchange (NSE), touching a 52-week low of ₹705.35 apiece.

According to PTI reports, the sharp decline made IndusInd Bank the worst-performing stock among the 30 constituents of the BSE Sensex. The broader market was also under pressure, with the Sensex falling 255 points, or 0.34%, to 73,860.17. Meanwhile, the NSE Nifty dropped 47.65 points, or 0.21%, to 22,412.65 in early trade.

The steep sell-off followed the bank’s regulatory filing on Monday, where IndusInd Bank reported that an internal review had uncovered certain discrepancies in the account balances of its derivatives portfolio. The Mumbai-based lender stated that the review was conducted in line with the Reserve Bank of India’s (RBI) directives issued in September 2023 regarding the investment portfolios of banks, specifically concerning ‘Other Asset and Other Liability’ accounts.

According to the bank’s statement, the internal assessment revealed that the adverse impact of the discrepancies could be around 2.35% of the bank's net worth as of December 2024. This translates to an estimated hit of approximately ₹1,500 crore, according to market experts.

Following the disclosure, IndusInd Bank held an analyst call to address concerns. The bank confirmed that an external auditor has been engaged to conduct an independent review of the matter, with the report expected to be finalised by the end of March 2024.

Despite the negative development, IndusInd Bank sought to reassure investors by stating that the bank's overall profitability and capital adequacy remain healthy enough to absorb the one-time impact from the discrepancies.

The stock had already faced pressure on Monday, closing nearly 4% lower after the RBI’s decision to extend the tenure of the incumbent CEO by only one year. The bank had reportedly sought a three-year extension.

Market analysts believe that the combination of governance concerns, the RBI’s cautious approach on leadership tenure, and the uncertainty around the derivatives portfolio have contributed to the sharp fall in IndusInd Bank’s stock.

"The discovery of discrepancies in the derivatives portfolio raises concerns about the bank's internal controls and could impact investor confidence in the short term," said a financial expert quoted by PTI.

As per PTI reports, the steep fall in IndusInd Bank's stock reflects broader market nervousness, with investors remaining cautious about the potential financial and reputational fallout from the derivatives issue. The coming weeks are expected to be critical as the external auditor's report could provide further clarity on the extent of the problem and its long-term impact on the bank's financial health.

IndusInd Bank’s management has assured investors that corrective measures are already being implemented to prevent such discrepancies from occurring in the future. However, market sentiment is likely to remain fragile until the final audit report is released.

(With inputs from PTI) 

"Exciting news! Mid-day is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest news!" Click here!