IndusInd Bank Share Price Alert: Moody's Puts The Lender On Review For Downgrade; All Details Here

IndusInd Bank's share price traded range-bound even after global ratings agency, Moody's placed the private sector lender's baseline credit assessment under review for downgrade. Moody's action comes amid concerns over internal control discrepancies in derivative accounts and retail loan stress of the bank.

Moody's affirmed IndusInd Bank's ratings underlining that the private lender's core profitability, strong capital, and stable funding will likely mitigate near-term risks to standalone credit strength, reported news agency Reuters.

The rating agency also expressed concern over IndusInd Bank's accounting discrepancies and uncertainty regarding leadership change. On 10 March, the Reserve Bank of India approved a shorter extension of one year to IndusInd Bank CEO Sumanth Kathpalia. The company's board had approved the central bank's typica three-year extension.

IndusInd Bank attracted review for downgrade after it disclosed discrepancies in its account. The rating agency also mentioned another reason for its assessment including concerns surrounding retail unsecured loan portfolio which could impact IndusInd Bank's profitability, capital and funding.

"The stabilization of the BCA will also be subject to the bank resolving the concerns surrounding senior leadership positions, as well as its financial controls and risk management," ANI quoted Moody's report

IndusInd Bank share price today

IndusInd Bank shares were trading 0.46% higher at Rs 680 apiece on BSE at 1:30 pm. The company stock tanked significantly over the past few days amid concerns about its accounting discrepancies.

IndusInd Bank's stock price has fallen significantly during the past trading sessions. The company scrip has fallen over 31% in the last two weeks. The massive stock value decline weakens investors' sentiment, adding to the worries of depositors of IndusInd Bank. Whereas, in the last year, its share value has declined by over 54%.

IndusInd Bank accounting discrepancies

IndusInd Bank earlier indicated that it has discovered an accounting discrepancy worth Rs 2,100 crore around September- October last year.
While giving the preliminary update to the central bank about the accounting lapse in March last week, the bank also informed that it has formed an external committee to review the matter.

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The exact number and other details about the accounting lapse will be confirmed by the external auditors after the review will be completed next month.

In an exchange filing, IndusInd Bank pointed out some discrepancies that it observed during the internal review of the process. Amid rising concerns about IndusInd Bank's financial position, the bank last week assured that it has enough reserves and capital to cover for it. IndusInd Bank CEO and Managing Director Sumant Kathpalia said that the accounting lapse was noted around September-October last year and the bank gave a preliminary update to the RBI about this last week.

RBI asks IndusInd Bank to complete audit before March 31

The Reserve Bank of India instructed IndusInd Bank to complete the external audit at the earliest and submit the report before the end of the financial year 2024-25. RBI in its statement, released on Saturday, also said that the bank's situation is well-capitalised and stable.

RBI also assured people that its situation is stable and urged people to not pay heed to speculative reports. In its statement, RBI said that the IndusInd Bank has already roped in a team of external auditors to comprehensively review their current systems.

"IndusInd Bank is, embarrassingly, in our model portfolio and a top pick for CY25. The derivatives loss, though a one-off, is a setback to management credibility. The transactions should not have been treated as two-legged, when one is purely internal. Applying different standards to each leg made it even worse and the bank was, effectively, overstating NII for an extended period. Despite the management's protestations, we think the disclosure could have been made sooner," said Emkay Global.

IndusInd Bank could have made the disclosure sooner, but the bank's business outlook is improving and the bank is in good position to exploit any recovery in the auto segment.

"The silver lining is that the business outlook is improving. The MFI stress should be over
by 1QFY26; the bank is well-positioned to exploit any recovery in the autos segment
(25.5% of loan book); a low-floating rate exposure makes it a beneficiary of falling rates.
Valuations (FY26E P/B - 0.8x) have over-discounted the derivatives loss, but that is
natural when credibility is an issue. The promoters and board now have an opportunity
to address investor skepticism with a statement hire when choosing Sumant Kathpalia's
successor. We are keeping the stock in the EMP (too late to sell) though we are cognizant
that, barring a near-term dead-cat bounce, the stock will mark time until the new CEO is
announced," Emkay Global added.