A day after IndusInd Bank disclosed a Rs 1,580-crore discrepancy in its derivatives portfolio, the lender’s shares plunged 27%, marking its biggest single-day fall on Tuesday. This crash led to a market capitalisation erosion of over Rs 19,000 crore and a Rs 5,500-crore notional loss for mutual funds.
With an m-cap of Rs 51,102 crore at Tuesday’s close, IndusInd Bank has now slipped to the sixth-largest lender position with its valuation falling below Yes Bank’s Rs 51,357 crore.
Ashok Hinduja, the promoter of IndusInd Bank, tried to calm the nerves of investors, saying that the lender’s financials remain healthy. “If additional capital is needed, promoters and long-term global investors, who have been with the company for 30 years… are committed to supporting it,” Hinduja told television channels.
Mutual funds own a 30.31% stake in IndusInd Bank at the end of the December 2024 quarter compared to 15.63% stake a year ago, according to the BSE data. As of December 2024, 38 mutual funds collectively held about 219 million shares of IndusInd Bank. The value of these holdings has declined to Rs 14,350 crore from Rs 19,696 crore on Monday.
ICICI Mutual Fund holds the largest stake of 5.07% followed by SBI Mutual Fund’s 4.33% and HDFC Mutual Fund’s 4.17%.
The fall in shares was triggered after the private lender said on Monday that an internal review of its derivative portfolio revealed discrepancies, which could hit its net worth by approximately 2.35% as of December 2024.
Analysts have downgraded the stock and cut its price targets, saying that the current crisis has dented the bank’s credibility.
“Although the financial implications are negligible, it raises the broader issue of credibility,” MB Mahesh, executive director for research at Kotak Securities, wrote in a note. “Trust is a crucial part of any investment thesis. It may take some time to rebuild this trust and make the stock investable again.”
This setback came after the RBI granted CEO Sumant Kathpalia only a one-year extension, against the board application for three years, creating uncertainty among investors.
Among the key public investors that held over 1% stake in the bank as on December 2024 are Life Insurance Corporation of India (LIC), ICICI Prudential India Opportunities Fund, SBI Nifty 50 ETF, the government of Singapore, UTI Large Cap Fund and Nippon Life India Trustee-A/C Nippon IndiaArbitrage Fund.