IndusInd International Holdings Ltd (IIHL) Chairman Ashok Hinduja has stated that the promoters are prepared to inject capital into IndusInd Bank if required. However, he emphasized that the bank’s capital adequacy remains strong at present, and there is no immediate need for additional funds.
His statement follows a sharp drop in IndusInd Bank’s share price last week, triggered by the disclosure of discrepancies in the bank’s forex derivative portfolio, which could impact its net worth by over 2%.
Derivative Discrepancies and Market Reaction
IndusInd Bank, India’s fifth-largest bank, revealed last week that an internal audit had uncovered an accounting error related to forex derivative transactions. The discrepancy amounts to ₹1,575 crore (post-tax), representing 2.35% of the bank’s net worth as of December 2024.
The news led to a 27% decline in the bank’s share price on Tuesday last week, marking a 52-week low for the stock. However, following regulatory assurances from the Reserve Bank of India (RBI), the stock has since stabilized, with shares closing at ₹681.70 on Tuesday, up 0.70%.
Hinduja Group’s Ownership Expansion Plans
IIHL currently holds a 15% stake in IndusInd Bank and has received initial approval from the RBI to increase its stake to 26%. However, the final regulatory nod is still pending.
“All communication responses have been given to the regulator. It is now left to the regulator to decide when and how they will give us approval,” said Ashok Hinduja.
RBI Reassures Investors on IndusInd Bank’s Stability
On March 15, the RBI issued a statement addressing speculation regarding IndusInd Bank’s financial health, confirming that the bank remains well-capitalized and stable.
As per the bank’s latest financials:
- Capital Adequacy Ratio: 16.46% (above regulatory requirements)
- Provision Coverage Ratio (PCR): 70.20% (indicating strong asset quality)
- Liquidity Coverage Ratio (LCR): 113% (above the regulatory minimum of 100%)
The central bank urged investors not to react to speculation, assuring that IndusInd Bank’s financial position remains sound and is being closely monitored by regulatory authorities.
External Audit and Market Response
In response to the derivative discrepancies, IndusInd Bank has engaged PwC as an external auditor to conduct an independent review of the transactions in question. Market confidence in the bank now largely depends on PwC’s findings.
Following the RBI’s reassurance, IndusInd Bank’s shares rebounded 5.58% on Monday, touching an intraday high of ₹709.90 on the National Stock Exchange (NSE).
With promoters willing to provide capital support if necessary, investors will be closely monitoring both regulatory approvals for IIHL’s stake increase and the outcome of the PwC audit to determine the bank’s long-term stability.
