IndusInd Bank Shares Slid 4% after More Accounting Lapses Surface

Shares of IndusInd Bank fell as much as 4% by 10:30 AM on the NSE today, as escalating troubles spooked investors. On Thursday, the bank disclosed that its internal audit department had noted an aggregate amount of Rs 674 crore was incorrectly recorded as interest over three quarters of FY25, which was fully reversed on January 10 this year. The stock has already declined over 45% over the past year and 19% year-to-date.

The internal audit was reviewing the bank’s microfinance business following certain concerns brought to its attention. During this process, the audit department found unsubstantiated balances worth Rs 595 crore in ‘other assets,’ which were offset against corresponding balances under ‘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 those responsible for these lapses, and will take appropriate action,” IndusInd Bank said in an exchange filing.

This accounting issue comes on top of previously reported lapses in the bank’s derivatives portfolio. In March, the private sector lender had disclosed accounting irregularities in its derivatives book, which were followed by the resignations of both the CEO and Deputy CEO. The impact of that lapse was quantified at 2.35% of the bank’s net worth as of December 2024. An external audit estimated the negative impact at Rs 1,979 crore as of June 30, 2024.

Brokerage firms turned cautious following the latest disclosure. CLSA downgraded IndusInd Bank to ‘hold’ from ‘buy’ and cut its price target to Rs 780. CLSA noted that the bank’s core net interest margin would be 17 basis points lower than reported, once adjusted for the interest income anomaly.

The brokerage also slashed the bank’s earnings estimates for FY25 by 22%, and for FY26 and FY27 by 13% and 17%, respectively. Meanwhile, Morgan Stanley flagged a 15-20% downside risk to the lender’s earnings estimates for FY26 and FY27. It maintained an ‘equal-weight’ rating on the stock with a price target of Rs 755.