IndusInd Bank Ltd.’s credibility and earnings will be impacted, say analysts, after the lender identified accounting discrepancies of 2.35% of the bank’s net worth as of December 2024 in its derivatives portfolio during an internal review. Several brokerages have reduced their target price for the bank’s stock amid fresh turmoil.

The bank has appointed an external agency to review and validate its internal findings independently. The disclosure followed the Reserve Bank of India’s September 2023 guidelines on bond investment categorisation and valuation.

This will have an approximate impact of Rs 2,100 crore, the management said in an analyst call.

Recent developments have raised the risk perception and impact disclosed borrowings cost too, Citi said in a note.

“Whether this process lapse is one rationale for RBI’s discomfort or there is more to it needs to be monitored,” it said, referring to last week’s decision by the banking regulator to allow only a one-year extension to Chief Executive Officer Sumant Kapthalia.

IndusInd Bank will face a “litmus test” from the succession viewpoint and the board is likely to evaluate both external as well as internal candidates, the brokerage said.

Analysts at Nuvama called the timeline of multiple negative events in FY25 “discomforting”—the CFO resigned just before the third-quarter earnings, the CEO got a shorter extension and now a derivatives-induced dislocation.

“A negative derivatives’ disclosure has the potential to unnerve investors more than a back-dated NPL disclosure,” the brokerage said.

Emkay expects the IndusInd Bank stock to react adversely in the near term, to the recent events as well as to the elevated stress in MFI and hence remain under pressure.

IndusInd Bank Stock Rate Actions

  • Citi: Maintained ‘buy’ but target price cut from Rs 1,350 to Rs 1,160.

  • Nuvama: Downgraded to ‘reduce’ from ‘hold’ with the target price cut to Rs 750.

  • Emkay: Downgrade to ‘add’ from ‘buy’ with the target price reduced to Rs 875 from Rs 1,125.

Shares of IndusInd Bank closed 3.71% lower at Rs 901.95 on the NSE on Monday, compared to a 0.41% decline in the benchmark Nifty 50. The stock has fallen 42% in the last 12 months and 6% so far this year.

. Read more on Markets by NDTV Profit.IndusInd Bank share price closed 3.71% lower at Rs 901.95 on the NSE on Monday.  Read MoreMarkets, Business, Notifications 

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