Shares of IndusInd Bank Ltd are in focus on Wednesday morning after the private bank said it is not engaged with accounting firm Ernst & Young (EY) for a forensic audit as reported in a news report earlier. Instead, the lender insisted it is engaged with EY as a part of the process of finalisation of accounts by the bank’s Internal Audit Department (IAD). The private lender admitted it is conducting a review of the bank’s MFI business to examine “certain concerns” that have been brought to the bank’s attention.
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The review by the bank is ongoing, IndusInd Bank informed stock exchanges BSE and NSE.
Earlier, a report suggested that IndusInd had roped in EY to conduct another audit, to probe Rs 600 crore discrepancy in microfinance portfolio. This has triggered a selloff on the counter. IndusInd Bank had closed at Rs 788.55 on Tuesday, down 4.79 per cent.
The stock has been in news of late, having lost 38 per cent of its value in the past six months, after the bank received a report from external agency regarding the accounting discrepancies relating to derivative deals. IndusInd Bank said the report has quantified the negative impact as of June 30, 2024, at Rs 1,979 crore.
Based on the findings of the external agency report, the private bank has assessed an adverse post-tax impact of 2.27 per cent on its net worth, attributable to the identified discrepancies. An internal review conducted by the bank had earlier estimated a potential adverse impact of approximately 2.35 per cent on its net worth as of December 2024.
The RBI recently suggested that the financial health of the private lender was stable and under continuous monitoring. In an official release dated March 15, the central bank emphasised that there was no cause for concern among depositors in response to speculative reports at this time.
The central bank has extended the tenure of IndusInd Bank CEO to just one year, against three years, as requested. “Focus now shifts to the forensic audit report due from another external agency where the focus is to ascertain the root cause and accounting for the discrepancies,” Macquarie said in a recent note.
In the near-medium term, the foreign brokerage believes the focus would be to obtain more clarity around management succession.
“While we believe valuations for IIB are cheap at 0.6x FY27E P/BV, uncertainty around management succession, peak credit costs, sustainable margins, and other factors remain key monitorables,” it said.
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