IndusInd Bank is facing significant headwinds after reporting a net loss of Rs 2,329 crore, its largest in 20 years. Brokerages indicate the new MD and CEO will face an "uphill task" to restore the bank and regain investor confidence. This comes after a tumultuous period marked by accounting fraud and top-level resignations.
The bank's financial outlook appears muted in the near to medium term. Several brokerage firms have expressed concerns about the bank's shares. Emkay believes the recent developments could negatively impact the bank's business and financials.
Lapses in derivatives accounting, microfinance portfolio slippages, and fraudulent balance sheet disclosures have shaken the bank. Internal audits revealed the involvement of senior bank officials in overriding key internal controls. The bank has reported the likely involvement of senior management in the accounting fraud to the central government.
The IndusInd Bank Board is expected to submit names to the RBI for a new MD by June 30. Emkay suggests the RBI might consider appointing a nominee director or even a PSB banker as MD. Nuvama Institutional Equities noted that the new CEO must tighten internal controls and strengthen governance, potentially slowing earnings growth.
Following the dismal March quarter results, IndusInd Bank shares initially fell nearly 6%. However, the shares rebounded, trading at Rs 777.25, up 0.80% on BSE. ICICI Securities maintains a 'sell' rating with a target price of Rs 650, expecting a sharp EPS downgrade.