IIHL ready to support IndusInd Bank through equity infusion: Hinduja

Following IndusInd Bank’s weakest quarterly performance in the January-March quarter (Q4FY25), Ashok P Hinduja, chairman of IndusInd International Holdings (IIHL) — the bank’s promoter — said on Thursday that IIHL is ready to provide additional equity support if needed to drive business growth. 

 

His remarks come amid a wave of downgraded growth estimates from brokerages, reflecting growing scepticism about the bank’s prospects.

 

“Though the capital adequacy of the bank is quite healthy, for business growth, should any further equity be required, IIHL, as the promoter of IndusInd Bank, remains committed to supporting the bank, as it has done over the past 30 years,” Hinduja said.

 

Shares of the lender closed 1.82 per cent higher on the BSE on Tuesday, despite trading in the red in the early session.

 

IIHL holds a 12.06 per cent stake in the bank as of March 2025.

 

Additionally, IndusInd Ltd. holds 3.77 per cent stake in the bank. Cumulatively, the promoters own 15.83 per cent stake in the bank as of March 2025. Interestingly, in April 2023, the RBI had given its in-principle approval to the promoters to increase their shareholding in the bank. IIHL continues to await the final regulatory approval to increase its stake in the bank to 26 per cent from 15 per cent. 

 

Hinduja expressed confidence in the bank’s board and the current management for their swift action to address the various concerns.

 

“I express my continued, unequivocal trust in the chairman and board of directors of the bank for their appropriate, swift actions to address discrepancies and attendant areas of concern,” he said.

 

“The coordinated efforts of current management under the guidance and monitoring of the board and other stakeholders have ensured that the bank’s business remains healthy, with robust capital adequacy”, he said, adding that the continued confidence of the customers in the bank shows their trust in the institution, which has always been upheld.

 

“This shall be a new dawn with a sanitised slate to regain the position the Bank enjoyed for many decade”, he added.

 

IndusInd Bank, on Wednesday, reported a net loss of ₹2,329 crore in Q4FY25, as it substantially ramped up provisions and reversed incorrectly booked revenue and income entries linked to accounting discrepancies in the derivatives and microfinance discovered during the quarter. Despite the sharp Q4 loss, the bank reported a net profit of ₹2,575 crore for FY25, down 71 per cent year-on-year (Y-o-Y).  

 

According to analyst estimates, the accounting lapses of ₹4,660 crore had a bearing on the bank’s profit and loss account, of which derivative discrepancies were ₹1,960 crore; non-recognition of microfinance NPAs of ₹1,880 crore, resulting in provisions of ₹1,790 crore and interest reversal of ₹180 crore, excess interest and fee income recognition from MFI business, resulting in net revenue reversal of ₹420 crore and other incorrect accounting of previous years to the tune of ₹310 crore.

 

Brokerages have sharply cut their growth estimates for IndusInd Bank following its weak Q4FY25 performance and the discovery of several accounting discrepancies. They are also closely monitoring the appointment of a new CEO.

 

The bank’s board has stated that it is in the advanced stages of the selection process and is confident that a recommendation will be submitted to the Reserve Bank of India (RBI) well before the June 30 deadline.

 

"We cut FY26-27 estimates by 40 per cent as we adjust for the inflated base profitability, said IIFL Securities in a note. Analysts at IIFL Securities are forecasting 12 per cent loan growth in FY26, further net interest margin (NIM) contraction due to repo cuts, slower growth in microfinance business, elevated cost of raising new funds, and negative carry due to excess liquidity.

 

“We expect weak fee income growth due to sluggish business growth and forecast average credit cost of 140bps. This should result in Return on Asset (ROA) of 68/83 bps and return on equity (ROE) of 6 per cent — 7.5 per cent in FY26-FY27 respectively,” the note said.

 

“Though the capital and liquidity situation is comfortable for now, factoring business disruption and management uncertainty, we trim our profit after tax estimates by 16-34% over FY26-28,” said analysts at Emkay in a note.

 

Additionally, they said, given the series and intensity of frauds, the RBI may consider appointing a nominee director on the bank’s board and even push for a public sector banker as the MD, as has been seen in other beleaguered banks. 

 

“Even in the event of a private banker being onboarded, as the new MD they will be faced with the uphill task of resurrecting the bank and regaining customer/investor trust,” it said.

 

According to analysts at Macquarie Capital, clarity around management succession, peak credit costs, sustainable NIMs, and governance are key monitorables for the bank.