IndusInd Bank share price plunged 26 percent in March 11 trade to a fresh 52-week low, extending its losing streak for the fifth straight session. The sharp decline follows the private sector lender’s disclosure of discrepancies in its derivatives portfolio.
Shares of IndusInd Bank tumbled 26.01 percent to an intraday low of Rs 666.25 on the National Stock Exchange (NSE), dragging down the Bank Nifty index.
The company has now lost nearly Rs 78,762 crore in market capitalisation since its January 2024 peak. Its's current market valuation stood at Rs 51,028 crore, below than Yes Bank's market cap which stood at Rs 51,326.07 crore.
Tuesday’s fall marked the sharpest single-day drop in IndusInd Bank’s history, with the stock briefly touching Rs 670, a level last seen on November 3, 2020.
Key Factors Behind the Stock Decline
1) Discrepancies in Derivatives Portfolio: In a regulatory filing, IndusInd Bank said an internal review revealed discrepancies in account balances related to its derivatives portfolio. The review, initiated as per the Reserve Bank of India's (RBI) directions on investment portfolios, estimated an adverse impact of around 2.35 percent of the bank’s net worth as of December 2024.
Market experts estimate the potential impact to be around Rs 1,500 crore. Following the disclosure, the bank held an analyst call, confirming that an external auditor is reviewing the issue, with a report expected by the end of March 2024. However, the lender reassured that its profitability and capital adequacy remain strong enough to absorb this one-time impact.
2) Uncertainty Over Leadership Transition: Investor were concerned after the RBI granted a shorter-than-expected extension to the tenure of CEO Sumant Kathpalia. IndusInd Bank announced on Friday that it had received approval for Kathpalia’s reappointment for only one year, against the typical three-year term. In reaction, the stock fell nearly 6 per cent in Monday's trading session to its lowest level since July 2022
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3) Weak Q3 Performance: The bank reported a 39 percent year-on-year drop in net profit to Rs 1,402 crore, compared to Rs 2,301 crore in the same quarter last year.
Provisions and contingencies surged 87 percent to Rs 1,744 crore, reflecting higher funds set aside to cover potential loan losses. Additionally, asset quality deteriorated, with gross non-performing assets (NPA) rising to 2.25 per cent from 2.11 per cent in the previous quarter and 1.92 per cent a year earlier.
4) MFI woes: IndusInd Bank, a private sector lender, put microfinance loans worth Rs 1,573 crore up for sale after facing persistent asset quality challenges in its microfinance portfolio in December 2024.
According to Nuvama, the RBI has favoured external candidates for leadership positions in recent appointments. If this trend continues at IndusInd, it could add to near-term earnings uncertainty, particularly given the already weak outlook for the microfinance segment.
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