IndusInd Bank expects to lose up to ₹2,000 crore in net worth due to accounting gaps from past derivative transactions.
The Hinduja-backed lender told analysts late Monday that it will absorb the loss either this quarter or the next, while it awaits a final audit review — a disclosure that comes amid rising concerns about leadership stability and market value erosion.
IndusInd Bank's net worth is expected to decrease by ₹1,600 crore to ₹2,000 crore, or approximately 2.35% of total net worth, due to discrepancies in derivative transactions over the past five to seven years. The bank stated that it will adjust the impact in its fourth-quarter earnings or the first quarter of the following fiscal year.
"We began reviewing our internal trade book and discovered some discrepancies in our operations between September and October. We then hired an outside firm to conduct a review," CEO Sumant Kathpalia told analysts on a late-night call. "We believe that by the end of March or early April, we will have a better understanding of the situation. Although the initial findings appear to be consistent with what we have stated, we want to ensure complete validation.
Kathpalia confirmed that a preliminary update had already been shared with the Reserve Bank of India (RBI), and a final report had also been submitted. The external auditor's report is expected by the end of March.
IndusInd Bank's shares closed 3.87% lower on Monday at ₹900.50, resulting in a 37% market value loss over six months, with a 16% drop in the past month alone. The stock is currently trading near levels last seen in late 2022.
Regarding his one-year tenure extension, Kathpalia stated, "I don't know what the rationale is for them (Reserve Bank of India) to give me one year, but I think they're uncomfortable with the way my leadership skills are running the bank, and we have to respect that."
"I have committed to the bank for one year. The board will consider both external and internal candidates for the CEO position," he added.
Market watchers continue to be cautious. According to Bernstein, the stock is unlikely to rise until a CEO serving a full three-year term is in place. According to Macquarie Capital, Kathpalia could step down early or the bank may consider appointing a public sector banker as his successor, with the one-year extension seen as a suboptimal outcome.
