IndusInd Bank Stocks Tumble After INR 600 Crore Discrepancy Triggers Forensic Audit

IndusInd Bank stocks tumbled, down 6.3% to INR 776.15 on the Bombay Stock Exchange, after the lender decided to call in EY to look into a shortfall of INR 600 crore in its microfinance portfolio. The forensic audit was prompted by the revelation from the bank's statutory auditors that there was a serious question to be raised about the bank's financials for the fiscal year that ended March 2025. This event, the most recent of several in a very short timeline, is adding to the apparent unraveling of the bank's governance and accounting practices.

As of the time of reporting, the stock had slightly regained some ground, but it was still down 4.33%, trading at INR 792.20. Its steep one-year drop of 46% spotlights the combined impact of continuous operational warning signs and uncertainties over its audits. Investors are keeping a close watch on it, especially since the stock's price persistently hovers beneath some important technical levels, specifically, the 50-day, 100-day, 150-day, and 200-day simple moving averages.

EY Brought in Amid Mounting Pressure

The bank has enlisted EY, renowned for housing the country's heftiest forensic accounting outfit, to get to the bottom of the identified irregularities. Were they fraudulent? If so, who is accountable? The investigation concerns transactions that apparently took place in the second and third quarters of FY2025. Insiders say the discrepancy doesn't cover multiple fiscal years, but the opacity of what is happening, have turned up the heat on investors.

This fresh inquiry is separate from the ongoing audit by Grant Thornton Bharat, which is examining irregularities in IndusInd’s operations involving foreign exchange derivatives. The fact that EY has now been appointed indicates some level of urgency on the part of the board. Further, in light of this audit by Grant Thornton Bharat, it is a positive sign that the board is taking additional steps in conjunction with the appointment of EY.

Past Incidents Compound Investor Concerns

IndusInd's financial issues have now led to a forensic audit, but that's not the bank's first brush with scrutiny. In mid-April, an audit report was released to the investing public, detailing PwC's review of IndusInd's portfolio. Derivative securities, while serving useful purposes in hedging and other financial strategies, can also be risky. And how risky was IndusInd's portfolio, according to PwC? The accounting firm estimated that potential post-tax losses might hit INR 1,979 crore (around $275 million).

The bank has recognized that the accounting effect of these losses amounts to 2.27% of its net worth as of December 2024, calculated using June 2024 P&L data. Adding to the concern, these cumulative issues have harmed sentiment and kept the stock under pressure, even though it had a brief rise of 16.6% in March.

Despite some small technical recoveries, the long-term prognosis for the bank is seen as cautious. The 14-day Relative Strength Index (RSI) sits at 62.2, an area that tends to signal a neutral trend, but participants are anything but confident and in a hurry to forge ahead. With EY’s findings still pending and the Grant Thornton audit ongoing, a clearer path forward seems anything but imminent. Confidence in the dusky outlook for risk-and-compliance nether-lights has encouraged would-be investors to keep their checkbooks closed.