IndusInd Shares’ Brief Moment of Sunshine Interrupted by CEO's Resignation Rain Cloud

It seems like with every passing day IndusInd Bank comes up with some new red flags for itself. When the accounting lapses in the derivatives portfolio was not enough, reports of discrepancies in the microfinance portfolio weighed on the investor sentiment. Then came the resignation of deputy CEO and now it is a new day for the investors with new negative trigger to act upon.

Shares of IndusInd Bank will be in focus today after a five-day winning streak as the lender announced the resignation of its CEO and Managing Director, Sumant Kathpalia. This came just a day after its deputy CEO, Arun Khurana, resigned from its position. Interestingly, the stock rose after the deputy CEO’s exit. Kathpalia cited the ongoing row over discrepancies as the reason for his resignation.

"I undertake moral responsibility, given the various acts of commission/ omission that have been brought to my notice," Kathpalia had said in his resignation letter. Earlier the central bank had approved for a one-year extension of Kathpalia's tenure, though the private lender asked for a three-year term.

Meanwhile, the Reserve Bank of India approved the constitution of a committee of executives comprising of Soumitra Sen (Head – Consumer Banking) and Anil Rao (Chief Administrative Officer) as members, to oversee the operations in the absence of its chief executive officer under the oversight and guidance of an oversight committee.

The bank's CFO Gobind Jain had resigned in January, which is also now being linked to the said irregularities in the bank’s accounts. The Economic Times cited sources saying, “…with the board promising to hold employees accountable, more heads could roll.”

In March, IndusInd Bank made disclosure to exchanges that an internal review of its derivative portfolio revealed a potential impact of 2.35% on its net worth. External agencies, too, confirmed these allegations of discrepancies earlier this month.

The March disclosure by the firm pushed the stock to its 52-week low two days after it reported the lapses. Shares of the bank fell nearly 33% in the two days after the disclosure. However, the stock has offset some losses and has gained 38% since then, aided by updates from the bank on the external reviews.The stock is currently down 46% from its 52-week high.