IndusInd Bank shares in center after Rs 1,577 crore networth hit threat

The estimated Rs 1,577 crore hit will reflect in the bank’s earnings for the fourth quarter of the current financial year. The lender also revealed that these incosistencies in its derivatives transactions span the past five to seven years.

Following this declaration, IndusInd Bank held an analyst call and confirmed that an external auditor is reviewing the matter, with a report expected by the end of March 2024.

CEO Sumant Kathpalia, whose tenure was recently extended by one year by the RBI, addressed concerns about leadership stability. He admitted that the RBI may have had reservations about his leadership skills.

“We began reviewing our internal trade book and noticed some discrepancies in our business, which were identified between September and October. We then hired an external agency to conduct a review,” Kathpalia .

He added that the bank has already provided a preliminary update to the RBI, and a final update has also been submitted.

CEO TENURE EXTENSION RAISES QUESTIONS

The RBI’s decision to extend Kathpalia’s tenure by just one year, instead of the three-year extension sought by the bank, has raised concerns among analysts and investors. Some believe that the uncertainty surrounding leadership transition could affect the bank’s governance and asset quality, that leads to negative long-term market reactions.

Analysts compared the situation to 2023, when Kathpalia’s two-year extension led to investor concerns and stock volatility.

“The stock is unlikely to see any growth until a CEO with a three-year term is appointed," said Pranav Gundlapalle, head of India financials at Bernstein.

Investment firm Macquarie Capital suggested that Kathpalia may step down early due to the short extension granted by the RBI. The bank might also consider hiring a public sector banker for the top role.

“The IndusInd Bank CEO may decide to retire early given the sub-optimal tenure approval, or a new CEO could be appointed after his one-year term, possibly a PSU banker,” said Macquarie Capital’s associate director, Suresh Ganapathy, in a research report.