IndusInd Bank promoter Ashok Hinduja has assured investors that the bank’s financials remain strong despite a steep market sell-off following reported discrepancies in its derivatives portfolio. Hinduja emphasized that the lender will receive full support from its promoters and, if necessary, they are ready to inject capital to stabilize operations.
The assurance comes after IndusInd Bank’s stock crashed 26% on March 11, wiping out nearly ₹18,000 crore in market capitalization within hours. The steep decline followed the bank’s disclosure of derivatives-related discrepancies, which could have an estimated 2.35% impact on its net worth.
Market Panic Over IndusInd Bank’s Stock Plunge
Shares of IndusInd Bank, one of India’s largest private sector banks, plunged sharply after the unexpected disclosure. The heavy sell-off was driven by investor concerns over transparency and financial stability, compounded by brokers downgrading the stock and regulatory uncertainty regarding CEO Sumant Kathpalia’s reappointment.
In a media interaction, Ashok Hinduja addressed the panic, stating, “The bank lost over ₹16,000 crore in just two hours. The market situation has gone bad. But the bank has our full support. There is no need for panic.” He further assured investors that the promoter group has unwavering confidence in the bank’s board and management.
Transparency in Financial Disclosures
Hinduja emphasized that IndusInd Bank demonstrated high transparency by voluntarily disclosing the discrepancy. “This issue wasn’t identified by the auditor or regulator. It was the bank’s management that proactively revealed the problem,” he noted, adding that markets should have appreciated the bank’s integrity rather than reacting with extreme volatility.
The banking sector, built on trust and confidence, has seen similar cases globally, he added. “We have seen IndusInd Bank for 30 years. It has faced various challenges and has always managed them well. This will be resolved too,” Hinduja reassured.
Promoter Ready to Infuse Capital If Required
On the question of potential capital infusion, Hinduja confirmed that the promoter group is prepared to inject funds if needed. “If there is a need for capital, the promoter is ready to inject. We are already awaiting regulatory approval. But from what I see in the financial numbers, the bank’s capital adequacy remains strong,” he said.
IndusInd Bank’s capital adequacy ratio (CAR) remains well above the regulatory requirements, giving it room to navigate financial shocks.
Brokerage Downgrades and RBI Concerns
The stock rout worsened after brokerages downgraded IndusInd Bank, citing concerns over the Reserve Bank of India (RBI) granting only a one-year extension to CEO Sumant Kathpalia, instead of the usual three-year term. Analysts viewed this shorter tenure approval as an indication of regulatory concerns over governance issues at the bank.
Brokerages, including Jefferies, Macquarie, and Morgan Stanley, slashed their target prices on the stock, warning that the uncertainty over the CEO’s tenure could lead to further market corrections.
Estimated Financial Impact of Derivatives Discrepancy
The internal review of derivative transactions revealed a potential negative impact of around ₹1,500 crore on the bank’s profitability, according to sources. However, the final loss could be higher, as an external independent forensic review is still ongoing.
Despite the setback, the bank maintains that the issue is manageable and does not pose a significant threat to its overall stability. The promoter’s backing and strong capital reserves are expected to cushion the financial hit.
