Explained: Why an inconsistency of 1,577 crore in the Industrial Bank Market value is Rs. 15,000 crores made of holes

After announcing an accounting discrepancy of about Rs 1,577 crore in its forex derivatives portfolio with analysts on Monday evening, about.

The Industries Bank said that by December 2024, the discrepancy of the accounting will adversely affect its net cost of 2.35%. The post -tax impact will be Rs 1,577 crore based on the initial findings, and the fourth quarter will be reflected in its earnings.

What went wrong with the Industrial Bank?

During an internal review of other properties of the derivative portfolio and other liability accounts, the Indusined Bank noted some discrepancies in its derivative portfolio related to transactions in the past 7-8 years (FY24 and previous).

“The bank has mentioned that these derivative conditions are related to the conversion of foreign currency deposits / orrow. In simple terms, when the MTM on the outer hedge reflects the correct picture, there was a different method of internal hedge;

Since April 2024, the Industrial Bank has closed the internal hedging, post, which, around September 2024, recognizes the inconsistencies.

The bank has informed the RBI and is detecting external audit to point out the source of discrepancies. He also told analysts that the bank wants to estimate the best case of impact; Therefore, the Q3fy25 was not announced during the call.

Why was the impact on the Industrial Bank’s stock so serious

Since most brokerage stocks were down and lowering the target prices, it reached a fresh low of 702.60 at 22% lower, and the news was negative enough to send shares of the Industries Bank to the freefall.

Also read | Crash at IndSined Bank is at a 52-week low

While the economic impact of discrepancies may have a low, this issue is worried about credibility .The analysts say.

“Trust is a crucial part of any investment thesis, and this may take some time to rebuild and stock this trust

Re -investable. During the interim, we do not want to see any fresh negative consequences, because the bank has already seen negative, resulting in significant underpermens, “Kotak Equities said.

Indicating that it reflects poorly over internal restrictions, ICICI Securities said that the hit by P&L is likely to be a hit, and the bank could also report the damage in Q4FY25.

Nuwama said there is a possibility of more investors than the back-dated NPL announcement in the negative derivatives announcement.

“The timeline is discomfort — CFO resigned before the Q3 earnings, the CEO recently received a year’s expansion instead of three and now derivatives-indigenous dislocation. We believe.

The analysts of the Ilara Securities raised 5 questions – 1) why was this not previously published, 2) how such a break is possible despite the concurrent ITS ditts,)) Why did ITors do not share any qualifications,)) How did this issue become more than five years?

“This book raises a series of questions on the defects in terms of value processes and sanctity,” Alara added that the evaluation appears less, the book value is under the question of holiness.

Investors in IndusInd Bank are now surprised whether the worst ended or is still more in the store.

Also read | Shares of Industries Bank, downgrades, target price reductions. What should investors do

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