IndusInd Bank shares pare losses even as brokerages cut earnings forecast on fresh accounting issues

Given the series of negative news surrounding the lender, IndusInd Bank shares are down 24 percent in the last three months.

Shares of IndusInd Bank staged a massive 4.6 percent recovery to close the session almost a percent higher despite brokerages turning more cautious after the lender disclosed two new accounting lapses. Analysts have not only downgraded the stock but also flagged sharp cuts to earnings estimates for FY25 through FY27.

In a regulatory filing on Thursday evening, the private lender said that its Internal Audit Committee (IAD) was conducting a review of the bank's MFI business to examine certain concerns brought to the bank's attention. The report by the IAD dated May 8 highlighted that a cumulative amount of Rs 674 crore was incorrectly recorded as interest over three quarters of the financial year 2025, which was then reversed on January 10.

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After the development, international brokerage CLSA downgraded the stock to 'hold' from 'buy' and slashed the target price to Rs 780. Analysts suggest that adjusting for the Rs 674 crore additional interest income implies that the bank's core Net Interest Margin (NIM) was 17 basis points lower than the reported NIM. CLSA has slashed its profit after tax (PAT) forecast for IndusInd Bank by 22 percent for FY25, citing the recent financial reversal. The brokerage has also trimmed its FY26 and FY27 estimates by 13 percent and 17 percent, respectively, factoring in net interest margin (NIM) compression and slower growth.

Morgan Stanley, meanwhile, warned that the bank’s FY26 and FY27 earnings could face a 15–20 percent downside risk. The brokerage maintained its “equal-weight” rating on the stock, with a price target of Rs 755.

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Following a whistle-blower complaint, the audit committee of IndusInd Bank’s board directed its Internal Audit Department (IAD) to scrutinise transactions under the "other assets" and "other liabilities" categories. The IAD’s review flagged unsubstantiated balances amounting to Rs 595 crore in the “other assets” account, which had been offset against matching entries in “other liabilities” in January 2025.

"The IAD has also examined the roles and actions of key employees in this context. The board is taking necessary steps to strengthen internal controls, fix accountability of the persons responsible for these lapses and will take action as appropriate," the bank said in a filing with the stock exchanges.

These new irregularities come just a couple of weeks after the bank's MD and CEO, Sumant Kapalia, stepped down following the derivatives portfolio discrepancies. IndusInd Bank is in the process of appointing a new MD & CEO, and daily operations are currently being run by a "committee of executives", with approval from the Reserve Bank of India.

At close, shares of the company ended at Rs 785, higher by 0.6 percent from the last close on the NSE. Given the series of negative news surrounding the lender, IndusInd Bank shares are down 24 percent in the last three months.

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