IndusInd Bank Crashes by 26%; Discrepancies in Derivative Accounts May Hit Net Worth

IndusInd Bank shares fell by 26% on March 11 after it reported discrepancies in its derivative portfolio, which can wipe out ₹1,530 crore from its net worth.

As of 1:14 pm, shares of IndusInd Bank were trading at ₹666.25, an all-time low.

The banking major has come under a lot of scrutiny amid MFI stress, CFO resignation, RBI’s measure to slash the CEO’s term with only a one-year extension, and earnings pressure due to discrepancies in its derivative accounts. Brokerages have slashed target prices on the stock as they factored in declining investor confidence. However, the stock has fallen more than the estimates for the fifth consecutive trading session.

How did the brokerages react?

As per analysts, the bank is expected to report losses in Q4FY25, which can wipe out overall earnings by 25%.

Giving a target price of ₹750, Nuvama Institutional Equities have downgraded the stock. It said, “A negative derivatives’ disclosure has the potential to unnerve investors more than a back-dated NPL disclosure.”

The brokerage added, “The time-line is discomforting—the CFO resigned just before the Q3 earnings, the CEO recently got a one-year extension instead of three and now a derivatives-induced dislocation. We believe IndusInd’s credibility and earnings shall be impacted.”

Elara Capital has downgraded the stock to sell from accumulate at a lowered target price of ₹830.

Motilal Oswal downgraded the stock to neutral to set a revised target price of ₹925. The brokerage believes the board will expedite the process of evaluating both internal and external candidates for a suitable successor, which should help alleviate concerns and improve confidence in the bank’s operations.

ICICI Securities have aligned with the downgrading action by unchanging the target price at ₹850. They highlighted that discrepancies reflect poorly on internal control.