IndusInd Bank share price targets after Q4 loss, fraud; what’s next?

Shares of IndusInd Bank Ltd will be focus on Thursday after the private lender reported higher-than-expected losses for the March quarter due to accounting discrepancies and a fraud detected over the past few months and higher slippages in the microfinance business. The one-offs in the qurater were higher than previously disclosed, stock analysts said adding that this could impact retail deposits. 

Considering the uncertain outlook on various parameters, Nirmal Bang has cut our its earnings estimates for the bank by 23.6 per cent for FY26 and 13 per cent for FY27, respectively.  This brokerage valued IndusInd Bank at 0.8 time its March 2027E ABV and suggested a target price of Rs 730. 

“Our target multiple is at 47 per cent discount to its past 5-year average multiple of 1.5x. In our view, the stock will see an overhang in the near term to medium term due to (1) Slowdown in loan growth (2) Stress in unsecured loan segments and (3) Uncertainty over management transition. We maintain a ‘Hold’ rating on IIB,” Nirmal Bang said.

Nuvama said improper accounting resulted in one-offs in every key segment: NII, fees, opex, credit cost and NPLs. 

The management indicated that after one-offs, the operating loss of Rs 500 crore would turn to a pre-provision operating profit (PPOP) of Rs 3,06O crore. 

“We could not reconcile the adjusted and reported PPOP and fees based on explanations on the call/disclosures, though NII could be reconciled,” Nuvama said.

This brokerage said IndusInd Bank’s visibility for FY26E is low because it is unclear what happens to retail deposits after disclosures on repeated discrepancies in FY25. Requirement of maintaining high liquidity would impact net interest margin (NIM). 

“We slash EPS, and target to Rs 600 from Rs 750 earlier,” it said.

HSBC has reportedly slashed its target price on IndusInd Bank to Rs 660 per share, saying there is no clarity on rebuilding process at present. It cut FY26-27 EPS estimates by 41-43 per cent after the management made many one-off adjustments to correct accounting discrepancies.

Fresh concerns
IndusInd Bank, while reporting its Q4 earningsm said there was a potential case of internal fraud within its microfinance operations, where Rs 172.58 crore was inaccurately recorded as fee income in the financial year 2024–25. 

Besides, it said a cumulative amount of Rs 670 crore pertaining to MFI business was incorrectly recorded as interest over 9MFY25, which was fully reversed as on January 10, 2025. 

Add to that, there were unsubstantiated balances aggregating Rs 595 crore in ‘other assets’ accounts of the bank. These were set off against corresponding balances appearing in ‘other liabilities’ accounts in January 2025. Already the bank had declared a P&L impact of Rs 1,960 crore on accounting discrepancies relating to internal
derivative trades. 
IndusInd Bank also talked about the misclassification of certain microfinance loans resulted in under-provisioning and non-recognition of NPAs aggregating to Rs 1,885 crore. This has been corrected in 4QFY25 by recognizing this amount in slippages. Including these slippages, the overall slippages in MFI segment stood at Rs 3510 crore, which led to interest reversals of Rs 180 crore.

What’s next?
IIB is at an advanced stage in its hunt for a new CEO and shall soon submit a list to the RBI for approval. The new CEO will have to tighten internal controls, strengthen governance and likely rebalance the asset mix, implying a sharp slowdown in earnings growth for next two years, Nuvama said.

“Every other bank that has gone through accounting discrepancies or prior-period adjustments has taken 3–4 years to achieve a new normal. IIB, being a large bank, could take less time, but in our view RoA would remain well below 1 per cent through FY27E,” the brokerage said. 

Also, how retail depositors behave in the short term after back-to-back disclosures of prior-period adjustments is an unknown, Nuvama said adding that  IIB will thus need to maintain high liquidity at least in H1FY26E, impacting NIM in FY26E.

The RBI has advised the Bank to submit proposals for appointment of the new CEO for RBI’s approval by 30th June 2025.