Foreign brokerage firms, including CLSA and Investec, have lowered their recommendations for Indusind Bank Ltd stock after lenders raised two other accounting issues in their internal audits.
Indusind Bank said on Thursday its internal audit department found that Rs 674 crore was recorded as interest in its microcredit book> ₹In three quarters of the microcredit books for fiscal 2024-25, Rs 674 crore was “erroneously recorded as interest”. However, the money has been completely reversed, as Indusind Bank informed the stock exchange on January 10.
The audit team also revealed ₹The bank’s “Other Assets” account was worth $59.5 billion, adding that those balances stood out from the corresponding balances in the lender’s “Other Liabilities” account in January.
The audit team conducted a separate investigation into this after the whistleblower complained that alleged the Indusind Bank’s “Other Assets” and “Other Liabilities” accounts.
CLSA on Friday ‘holds’ its recommendation for Indusind Bank stocks from ‘outperform’ and lowers its target price to ₹900 rupees per share of 780. Investec has downgraded Indusind Bank shares to “for sale” with a target price of ₹650.
Indusind Bank shares have fallen more than 15% since March 10, when lenders marked Rs 153 billion in their derivatives account balances” ₹There are 15.3 million in its derivative account balance. The stock fell about 2% on Friday ₹BSE was 764.30 shares per share, while broader Sensex fell 0.30%.
Read also | Rs 6 billion in microcredit book error “> How Indusind Bank finds it ₹6 billion errors in its microcredit book
Profits and profits under pressure
Indusind Bank’s accounting problems end up causing ₹Its balance sheet has 19.6 million on its balance sheet for fiscal 2024-25.
In addition to stock downgrades, CLSA has also significantly cut its profit outlook for Indusind Bank in FY25 and FY26.
“Adjusted by Rs 674 crore ( ₹The additional interest income of Rs 674 crore means its core NIM (net margin) is 17bps (block point) below its reported NIM,” CLSA said in a Friday report. “As a result, we cut our PAT (after-tax profit) for fiscal 25 years is estimated at 22%. ₹$6.74 billion reversal and cut our fiscal 26-27 PAT estimates by 13%-17%, due to NIM compression and lower growth. We expect the bank to provide ROE (return on equity) of 9%-10% over the next two years. ”
“This should also see structural damage to core profitability and business growth during this period of bank uncertainty,” Investec said.
Kotak Institutional Stock also lowered its Indusind Bank earnings outlook and retained its stock recommendations for a “reduction”.
Last week, credit rating agencies lowered their perception of Indusind Bank credit.
Crisil places Indusind Bank’s long-term debt instruments on “negative impact rating watches” and the bank’s ₹400 billion tier II bonds (according to Basel III) and ₹“Crisil AA+/Watch Nater” 150 billion ten million infrastructure bonds.
Moody evaluates Indusind Bank’s baseline credit assessment as a “downgrade review.”
Following the initial disclosure, Indusind Bank conducted a forensic audit by Grant Thornton and conducted an accounting review of PwC’s derivative portfolio. The results of these investigations are that Indusind Bank CEO Sumant Kathpalia and Deputy CEO Arun Khurana announced their immediate resignation in April.
