IndusInd Bank shares rise over 3% after worst-ever show in Q4; lender promises no more setbacks

In the opening deals, the stock slipped as much as 5.73% to ₹725.80 apiece on the NSE after the battered private sector lender reported a ₹2,329 crore loss for the March 2025 quarter (Q4 FY25), its worst performance ever, as the interim management opted to go for a deep-clean exercise beyond recognising the impact of wrong accounting practices.

However, the stock saw a sharp recovery, and when last seen, shares were trading 3.18% higher at ₹794.40 apiece on the NSE. The stock hit a high of ₹794.80 in the trade so far.

Starting with a March 10 disclosure about a potential hit to the net networth because of incorrect recognition of derivative trades over the last two years, the last two months have been tumultuous for the Hindujas-promoted lender and have also witnessed the immediate resignation of chief executive Sumant Kathpalia and his deputy Arun Khurana amid allegations of insider trading as well.

In the March quarter, the bank took impact of all the irregularities brought to its notice, including a ₹1,960 crore hit from incorrect recognition of derivative trades, a cumulative interest income reversal of ₹674 crore due to incorrect accounting, a disclosed ₹172 crore fraud where employees had led it to incorrectly classify the amount as fee income under the microfinance business, the setting off of ₹595 crore of incorrect manual entries posted as "Other Assets" and "Other Liabilities" in the past, and also the recognition of the higher slippage.

IndusInd Bank Q4 Results: Key numbers

The overall gross non-performing assets ratio shot up to 3.13% as of March 31, as against 2.25% in the quarter-ago period and 1.92% in March 2024. The overall provisions more than doubled to ₹2,522 crore from ₹950 crore in the year-ago period.

On the microfinance front, the management said slippages will be elevated in FY26 as well, but things will move towards stabilisation from the second half onwards. Already, there have been reports of a bettering in collection efficiencies, and the crisis in Karnataka is also ebbing, they said.

The core net interest income declined 43% on-year to ₹3,048 crore on the back of a 2 percentage point narrowing in the net interest margin at 2.25% and a 1% growth in advances.

The corporate loan book declined 16% on-quarter to ₹1.43 lakh crore, and the management explained the same as a tactical call for maintaining liquidity buffers.

The other income declined by 72% on-year to ₹709 crore during the January-March period.

Going ahead, the bank, management said, will focus on secured consumer and small business loans and will take a measured stance on the corporate loans.

Deposits, on the other hand, have been stable on-quarter, though the share of the low-cost current and savings accounts declined during the quarter to 33%.

IndusInd Bank: Current leadership

After the CEO Sumant Kathpalia's resignation, the bank's management is led by Sunil Mehta, who is in a non-executive role. Mehta affirmed that all the shortcomings have been taken on board and sought to assure that there will not be any trouble in the future as it goes about "reinvigorating" the bank.

Mehta said based on the reviews that have been done, all the issues have been duly identified, addressed and disclosed to all the stakeholders.

"... the financial impact of all the issues that we have declared has already been undertaken in financial year 2024-25," Mehta said in a post-results conference with analysts, insisting that it starts FY26 with a clean slate. The bank discontinued its practice of interacting with reporters post-results.

The veteran banker said it was "unfortunate and painful" to see the lapses in governance and affirmed the board's resolve in addressing all the governance-related discrepancies. The board was not informed about the lapses in the past, Mehta said.

Sumant Kathpalia's successor

The process for identifying Kathpalia's successor is in advanced stages, Mehta said, adding that the board is on the lookout for a leader with a strong ethical foundation. Accountability for all the lapses will be fixed even as the bank goes through the process of getting back to business as usual, he said, adding that central government has been informed about the shortcomings.

The bank management insisted that adjusted for the one-time hits that it had to take, the IndusInd Bank franchise is strong and it performs well on other parameters.

What analysts say

Leading analysts are bearish on the IndusInd Bank stock. According to news reports, UBS noted that the Q4 results were weak amid uncertainty. It added that MFI loans had the largest contribution to total negative one-offs during the quarter. The board is to recommend possible CEO names to RBI before June 30.

The analysts at UBS note that the stock is not inexpensive at current levels and uncertainty is likely to result in derating.

Analysts at Morgan Stanley said they expected a sharp NII (net interest income) miss post recent disclosures; however, they were negatively surprised by incorrectly classified MFI slippage. The investment firm notes that a high-margin loan mix is moving lower and will weigh on return on assets (RoA) recovery. It expects gradual earnings recovery on a weak starting point.