IndusInd Bank’s Market Cap Falls Below Yes Bank, Erases Nearly Rs 19,500 Crore In Value

Shares of IndusInd Bank Ltd. plunged nearly 28% on Tuesday, wiping out Rs 19,484.08 crore in market capitalisation and dragging its valuation below that of Yes Bank Ltd.—a huge reversal in India’s private banking space.

IndusInd Bank’s market capitalisation stood at Rs 51,168.23 crore at Tuesday's close, while Yes Bank’s was higher at Rs 51,545.55 crore, making IndusInd the biggest laggard on the NSE Nifty 50 Index on Tuesday’s trade.

The steep selloff comes after IndusInd Bank, on Monday, disclosed accounting discrepancies in its derivatives portfolio amounting to 2.35% of its net worth as of December 2024, uncovered during an internal review. The bank also announced that it has appointed an external agency to independently review and validate its findings. 

The disclosure follows the Reserve Bank of India’s September 2023 guidelines on bond investment categorisation and valuation, under which the bank is reassessing its books. “A final report of the external agency is awaited, and based on which the bank will appropriately consider any resultant impact in its financial statements,” IndusInd Bank said in its exchange notification.

Despite the disclosure, the bank noted that its profitability and capital adequacy remain healthy enough to absorb the approximate Rs 2,100 crore impact expected from the identified discrepancy, as highlighted by management in an analyst call.

This announcement comes a day after the regulatory approval of tenure for the existing Chief Executive Officer, which was shorter than expected. 

However, this has sparked sharp reactions from brokerages, who flagged concerns over governance and risk controls. Analysts at Jefferies said, “While this is specific to certain types of transactions and relates to past years, it clearly reflects weak internal controls. This, along with a shorter CEO term extension and challenges in MFI, will limit rerating.”

The announcement came a day after the RBI granted only a one-year extension to CEO Sumant Kathpalia, shorter than what the bank had sought. Jefferies noted that the combination of the derivatives issue and CEO tenure uncertainty reflects internal control weaknesses, saying, “This comes as a negative surprise reflecting lack of internal controls.”

Further, the brokerage added, “The discrepancy has likely led to an overstatement of net interest income in the years prior to fiscal 2024. We lower fiscal 2025 earnings estimate by 25%.”

Following the developments, IndusInd Bank shares fell as much as 27.93% to Rs 649, hitting their lowest level since November 2020. The stock closed 27.16% lower at Rs 244.55 per share, compared to a 0.17% advance in the NSE Nifty 50.

The stock has now lost 57.55% of its value over the past 12 months, with traded volume surging to 21 times its 30-day average on Tuesday. The relative strength index stood at 13.15, indicating that the stock is deeply oversold.

Twenty-seven out of 48 analysts tracking the stock recommend a ‘buy,’ 17 suggest ‘hold,’ and seven rate it a ‘sell,’ according to Bloomberg data. The 12-month consensus target price stands at Rs 1,075.44, implying an upside of 63.4%.