IndusInd Bank stock falls: Promoter assures liquidity, no margin calls

IndusInd International Holdings Chairman Ashok Hinduja urged shareholders not to panic after IndusInd Bank's share price plummeted 23%

Addressing investor concerns, IndusInd International Holdings Ltd (IIHL) Chairman Ashok Hinduja has reassured that no margin calls had been triggered on pledged holdings and assured that the promoter group had strong financial backing to expand its stake in the bank once regulatory approvals were secured.

 

“IIHL is a holding company with over 600 shareholders and no direct business operations. It depends on dividends and the company’s valuation,” Hinduja told CNBC-TV18. He emphasised that the group remains financially sound, with sufficient liquidity to replace pledged shares if necessary.

 

Responding to concerns over transparency, Hinduja acknowledged investor frustrations about the timing of the disclosure but urged shareholders not to panic, reiterating that there was no need for additional pledging of shares.

 

 

IndusInd Bank shares plunge

IndusInd Bank’s share price plummeted 23 per cent on Tuesday, hitting a 51-month low of Rs 695.25 on the BSE. Investor sentiment was shaken after the bank disclosed accounting discrepancies in its forex derivatives portfolio, which could lead to Rs 1,530 crore (2.35 per cent) decline in its net worth. The stock’s sharp fall has resulted in a market capitalisation erosion of nearly Rs 20,000 crore.

 

The recent stock plunge marks IndusInd Bank’s sharpest intraday decline since March 2020, when shares fell 30 per cent during the Covid-19 market crash. The stock has now declined 56 per cent from its 52-week high of Rs 1,576 (April 2024) and is down 66 per cent from its all-time high of Rs 2,037.90 (August 2018).

 

IndusInd leadership concerns

The steep decline also followed the Reserve Bank of India’s (RBI) decision to approve only a one-year extension for CEO Sumanth Kathpalia, despite the board’s recommendation for a three-year term.

 

The RBI’s decision to extend Kathpalia’s tenure by just one year, following a two-year extension in 2023, signals continued regulatory concerns over the bank’s leadership and risk management practices.

 

During an analyst call a day earlier, Kathpalia acknowledged that the RBI might have reservations about his leadership, stating, “I think they are uncomfortable with the way my leadership skills with the bank have been, and I respect that. This is a litmus test for the bank and a succession point.”

 

Despite leadership uncertainties, Kathpalia assured that the bank’s growth agenda remains on track, regardless of whether he continues in the role beyond the extended term. The bank has appointed an external auditor to conduct an independent review, with findings expected by the end of March, it said in an exchange filing on Monday.