The Institute for Authorized Accounting India (ICAI) is likely to review Indusind Bank's books after accounting discrepancies reported by the bank in the derivative portfolio at the beginning of this week. The President of ICAI Charanjot Singh Nanda said The Economic Times: “As a proactive measure, the Audit Council for Financial Reporting (FRRB) ICAI may examine the relevant financial statements of Indusind Bank.”
Nanda said that if FRRB determines that the bank's financial statements do not meet the required standards “true and fair”, the power to escalate the issue of the ICAI disciplinary commission for potential steps against the auditors involved.
On Monday, Indussind Bank said the inconsistencies in its derivative portfolio could lead to a decrease in approximately 2.35% in its net assets since December 2024. The financial impact is estimated to be approximately 1,600 crore after taxes and approximately 2,100 crore before tax.
These discrepancies were discovered during the internal review of the bank's processes concerning other assets and liability accounts within their derivative portfolio. These transactions lasted during seven to eight years until the end of FY24.
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On Tuesday, Indusind Bank tried to deal with concerns about the accounting discrepancies and calm investors that it has adequate reserves and capital to solve the problem. Nevertheless, shares have decreased by approximately 30%since the announcement, which caused concerns about investors.
The Indusind Bank shares have been subjected to short -term additional supervision (ASM) – 1 phase NSE due to almost 30% decrease in its market value. The decision was made on 13 March.
On Thursday, Indusind Bank shares were closed on NSE 672.65 Rs, reflecting a reduction in 12.05 or 1.76%of RS.
Shares assessment
After revealing, several brokers reduced their assessment on stocks and reduced the target price as a result of an accounting errors in the Forex derivatives. This resulted in a potential impact of 15.8 billion Rs, which is 2.35% of the net assets of the bank, which raised concerns about the governance and predictability of earnings.
ICICI Securities emphasized weak internal controls and said that the impact would be influenced by a profit and loss statement, which will potentially lead to a loss in the fourth quarter of the fiscal year 2025.
Nuvama also reduced its evaluation to Indusind Bank from “Hold” to “Reducing” and reduced its target price to RS 750 due to problems with credibility arising from different negative events, such as CFO resignation, shortened extension of the term and derivative Forex. Broaching assumes continuing calls for earnings.
On the contrary, CLSA, a global brokerage company, captivated a different opinion and maintained an “outperform” evaluation and set the target price of 900 RS, which is 31% higher than the previous day.
