IndusInd Bank’s stock witnessed a sharp decline of 27.17% in a single day, resulting from various negative factors such as discrepancies in the accounting of derivatives portfolio, a shorter tenure approved for the CEO by the regulator, and concerns regarding the asset quality of the microfinance portfolio.
The estimated impact of around ₹1,500 crore on the balance sheet due to accounting discrepancies in the derivatives portfolio led to the significant drop in the bank’s stock price. Despite this, the promoters of the bank, Indusind International Holdings Ltd (IIHL) and Indusind Ltd, reassured shareholders not to panic and expressed their commitment to the institution. They even indicated their willingness to increase their stake in the bank.
Ashok Hinduja, Chairman of IIHL, stated that the estimated impact was manageable and that the management was working to address the issue. He emphasized the long-term growth story of the bank and the promoters’ unwavering support. Hinduja also mentioned that the promoters have received in-principle approval from the RBI to increase their stake in the bank from 15% to 26%.
In response to the internal review findings, which revealed discrepancies in the derivative portfolio accounting, the bank is working on validating these findings through an external agency. The bank’s profitability and capital adequacy are strong enough to absorb this one-time impact.
Furthermore, the RBI extended the CEO’s tenure for a year despite the initial three-year re-appointment approval by the bank’s board. The promoters are prepared to inject capital into the bank once they receive final approval from the regulator.
Overall, despite the challenges faced by IndusInd Bank, the promoters remain confident in the institution’s resilience and are committed to supporting its growth and stability in the long run.
