IndusInd Bank Shares Dip Despite Rebound as Accounting Lapses Spark Brokerage Downgrades
IndusInd Bank Shares Take a Hit Despite Rebound
Shares of IndusInd Bank experienced a rollercoaster ride on Friday, initially plunging over 4% after the bank disclosed fresh accounting issues. Despite this dip, the stock managed a remarkable 4.6% recovery to close almost 1% higher than the previous day. This volatility comes amidst a string of negative news surrounding the lender, with IndusInd Bank shares having plummeted 24% in the last three months.
Accounting Lapses and Brokerage Downgrades
The recent turbulence stems from a regulatory filing where IndusInd Bank revealed that its Internal Audit Committee (IAD) was investigating concerns related to its Microfinance Institutions (MFI) business. The IAD’s report, 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. This amount was subsequently reversed on January 10.
Responding to these revelations, international brokerage CLSA downgraded its rating on IndusInd Bank to ‘hold’ from ‘buy’ and slashed its target price to Rs 780. Analysts at CLSA pointed out that adjusting for the additional interest income implies a 17 basis point lower core Net Interest Margin (NIM) than initially reported. With this development, CLSA has significantly reduced its profit after tax (PAT) forecast for IndusInd Bank by 22% for FY25. The brokerage also trimmed its estimates for FY26 and FY27 by 13% and 17% respectively, citing NIM compression and slower growth.
Morgan Stanley echoed these concerns, warning of a 15–20% downside risk to FY26 and FY27 earnings. While maintaining its “equal-weight” rating on the stock with a price target of Rs 755, Morgan Stanley highlighted the potential impact on the bank’s financial performance.
Internal Scrutiny and Leadership Changes
IndusInd Bank has taken steps to address these accounting lapses. Following a whistleblower complaint, the bank’s audit committee directed its Internal Audit Department (IAD) to scrutinize 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, offset against matching entries in “other liabilities” in January 2025. The bank has stated that it is taking steps to strengthen internal controls, determine accountability, and take appropriate action against those responsible for the lapses.
These recent issues come on the heels of the bank’s Managing Director and CEO, Sumant Kapalia, stepping down earlier this month following discrepancies in the bank’s derivatives portfolio. IndusInd Bank is currently in the process of appointing a new MD & CEO, and daily operations are being managed by a committee of executives, with approval from the Reserve Bank of India.
Despite the challenges, IndusInd Bank shares managed to close the day higher, showcasing some resilience in the market. However, the ongoing investigations and accounting concerns cast a shadow over the bank’s future prospects, highlighting the need for swift and decisive action to restore investor confidence.
