IndusInd Bank shares tank 5% as PwC report likely by March 28

Shares of IndusInd Bank Ltd tumbled 5 per cent in Tuesday's trade amid reports PwC is set to submit a report to the private lender's board detailing the Rs 2,100 crore discrepancy in derivatives accounting. The comprehensive report is expected to outline the actual losses incurred by the bank, identify lapses at various levels, and suggest remedial actions, PTI reported sources as saying.

Following the development, the stock fell 5.04 per cent to Rs 635.40 on BSE. The scrip is down 38 per cent in the past one month.

IndusInd Bank has declared a preliminary impact of 2.4 per cent of its net worth due to a change in the valuation of derivatives transactions. Grant Thornton has been engaged for a forensic audit as Moody's reviews the bank's credit rating. IndusInd Bank is anticipating the submission of a crucial report by PwC that will address a Rs 2,100 crore discrepancy in its derivatives portfolio.

The Reserve Bank has instructed IndusInd Bank's management and board to take necessary corrective measures within the current quarter, which concludes on March 31.

"We would like to take the stance that this issue is primarily restricted to IndusInd Bank. In the past, we have observed similar unpredictable events, such as the SWIFT-related challenges in 2018, and the fears dissipated once we received confirmation from other lenders. We are likely to shift our focus back to some of the core issues faced by the sector: deposit mobilization, NIM pressure, as lenders have delayed cutting deposit rates, and the low-growth environment," Kotak Securities said in a recent note.

The stock was also recently in news after the RBI's reappointment of incumbent bank CEO Sumant Kathpalia for one year only. This is against the board’s application for three years.
In efforts to further investigate the issue, IndusInd Bank enlisted the services of Grant Thornton to conduct a forensic audit. This audit is aimed to determine the root causes of the accounting lapses and verify the accuracy and impact of the accounting treatment of derivatives contracts.

Grant Thornton's investigation will focus on prevailing accounting standards and establish accountability for any discrepancies identified, PTI reported. The bank had disclosed these discrepancies in its accounts related to derivatives on March 10.

Following the bank's disclosure of the discrepancies, global rating agency Moody's placed IndusInd Bank's Baseline Credit Assessment under review for a potential downgrade. Moody's has kept the bank's Ba1 Baseline Credit Assessment and adjusted BCA on review, considering the standalone financial health of the bank without factoring in any potential support from related entities.

Despite the significant impact on its net worth, IndusInd Bank has not sought fresh capital from its promoters, according to IIHL chairman Ashok Hinduja. IIHL, the investment arm of the Hinduja Group, recently received the Reserve Bank of India's approval to increase its stake in IndusInd Bank from 16 per cent to 26 per cent. Ashok Hinduja affirmed that IndusInd International Holdings Ltd, the Mauritius-based promoters, are committed to infusing capital into the bank if necessary, ensuring the bank's financial resilience.