By Nandan Mandayam and Siddhi Nayak
(Reuters) -Shares of Indian private lender IndusInd Bank slumped an exchange-allowed maximum of 20% on Tuesday, a day after it reported discrepancies in derivatives accounting in its books that analysts said could result in a one-time hit to earnings.
Shares of India’s fifth-largest private sector bank by assets were trading at 720.35 rupees, their lowest since November 2020, and were on course to log their steepest fall since March 2020.
India’s benchmark index Nifty 50 was down 0.27%, while the banks index fell 0.7%.
The Mumbai-based IndusInd Bank on Monday flagged a 2.35% hit to its net worth as of December 2024 due to an under-estimation of hedging costs with regards to some past forex transactions, without sharing more details.
The discrepancies in the derivatives book were identified by September-October, the bank’s CEO Sumant Kathpalia said in a late-evening conference call.
Such issues create questions on the robustness of banks’ internal process and compliance, Macquarie said in a note.
Jefferies analyst Prakhar Sharma said that while this was specific to certain types of transactions and relates to past years, “it clearly reflects weak internal controls”.
Sharma expects a one-time hit to 2024-25 earnings and says the case could drive some de-rating for the shares.
Four of 38 analysts tracking the stock rate it “sell”, the most with that rating in at least two years, as per data compiled by LSEG. On an average, the analysts have a “buy” on the shares.
(Reporting by Nandan Mandayam in Bengaluru and Siddhi Nayak in Mumbai; Editing by Mrigank Dhaniwala)
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