Shares of IndusInd Bank extended gains from the last session and moved another 5% higher on April16 as investors rejoiced in hopes of limited impact on the company’s financials from the near Rs 2,000 crore derivatives discrepancies.
The lender received reports from an external audit that showed discrepancies of Rs 1,979 crore in its derivatives portfolio. Basis the report, the lender assessed a negative impact of 2.27% kicking to its net worth for 2024.
The impact was not just lower than what the Reserve Bank of India had assessed but also below the lender’s initial estimates of a 2.35% impact. The lesser-than-expected fallout of the derivatives discrepancies spurred optimism among investors.
Global investment firm Macquarie also touted this lower-than-expected fallout as an incremental positive for the lender, in the near-term. To that effect, the firm also retained its ‘outperform’ call on the stock. Macquarie also held a target price of Rs 1,210 for the stock, forecasting a staggering over 64% upside potential from the previous closing levels.
Top Brass Under Scrutiny
Now while this issue at hand seems to have largely been dealt with, reports suggest that the timeline and manner of disclosure have reportedly raised concerns with the regulator, which could spur senior-level exits.
At least three top executives are likely to step down in the coming months, including CEO Sumant Kathpalia and Deputy CEO Arun Khurana, who was responsible for global markets and the derivatives portfolio, CNBC-TV18 said in an exclusive report.
The board has already begun succession planning after the RBI extended Kathpalia’s tenure by only one year. The report further stated that the central bank has asked the board to start identifying potential CEO successors and submit a shortlist of candidates at least four to six months before Kathpalia’s term ends in March 2026.
The private lender had first raised the issue on March 10, disclosing that an internal review had uncovered discrepancies in derivative account balances that had built up over the past 5 to 7 years.
In an interaction with CNBC-TV18, CEO Sumant Kathpalia had revealed that the issue was first detected in October 2024.
“We found this anomaly around October, and that’s when we initiated our internal assessment and brought in an external agency. At the time, we weren’t aware of the full scope, we initially thought only two deals were misaccounted, but it turned out there were several more. Once we understood the impact, we convened a board meeting and made the disclosure,” he had stated.
Addressing concerns about the financial fallout, Kathpalia added, “The full year will not reflect a loss. In fact, I believe Q4 will still show a profit even after factoring this in.”
Ownership Shifts
Amid ongoing discrepancies, IndusInd Bank also saw a marginal decline in promoter ownership during the January–March quarter, as per the latest shareholding pattern filed with the Bombay Stock Exchange.
Retail investors, however, stepped in during the nearly 35% slide in the stock last quarter. The number of retail shareholders rose to 7.47 lakh in March, up from 6.17 lakh in December. Their collective ownership also increased to 9.17%, compared to 7.9% in the previous quarter.
Promoter holding in the bank now stands at 15.83%, down from 16.29% at the end of December.
A recent note from Nuvama Alternative & Quantitative Research also highlighted that two fund houses, namely, Kotak Mutual Fund and Quant Mutual Fund fully exited IndusInd Bank in March. Kotak Equity Arbitrage Fund, which held a 1.26% stake as of December, no longer appears in the updated shareholding data. Quant Mutual Fund’s name was absent in both quarters, suggesting it held less than a 1% stake previously.
Domestic mutual fund ownership in the bank fell to 27.55% in March, down from 30.31% in the previous quarter.
