Why IndusInd Bank Share Price is Falling

For the past few days, a private sector banking stock has been facing some pressure.

The bank in question is IndusInd Bank.

This week, the bank in a filing, said the Enforcement Directorate has lodged an investigation against certain entities and some bank employees.

IndusInd Bank share price is currently trading at Rs 807, and is down over 5% in the past five days.

Let's take a look at the probable causes on why IndusInd Bank is under pressure.

#1 Sectoral effect

The repercussions of the Russia-Ukraine war, the fleeing of FIIs, among other reasons have hurt the economy.

As a consequence, the government was compelled to raise the repo rate, resulting in interest rate hikes.

To offset the effect of the government's interest rate hikes, banks have had to raise their lending rates on loans.

The stock markets appear to be undergoing corrections to get past this hurdle.

Due to this, the Bank Nifty index has declined by 6.2% in 2022 so far, from 35,341 level to currently trading at 33,270 points.

Let's take a look at IndusInd Bank and its peers performance in 2022.

Banking Stocks -Performance in 2022

Bank	Change in 2022 (%)
IndusInd Bank	-10.4
HDFC Bank	-10.2
ICICI Bank	-1.4
State Bank Of India	3.8
Kotak Bank	-3.3
Axis Bank	-2.8

Source: Equitymaster

Rising interest rates do not paint a good picture at a time when recession fears are looming large and the rate hike may put pressure on the banks' asset quality.

#2 Whistle-blower case

The sectoral effect was a secondary reason. This whistle-blower case is the primary reason why shares are under pressure lately.

The curious case of IndusInd bank is back in limelight.

On 13 July 2022, the Enforcement Directorate (ED) lodged an investigation against certain activities and a few bank employees for some financial irregularities in an old case dated 2011-2014.

The first information report (FIR) was filed on 9 July 2022 with Chennai Police and submitted a Suspicious Transaction Report (STRs) about the same.

So, what really happened in past that is coming back to haunt IndusInd Bank?

A group of senior employees from IndusInd Bank's arm notified the RBI and the board about governance violations and charged them with evergreening in November 2021.

At that time, the bank dismissed the charges of loan 'evergreening' as false and unsubstantiated, though it confessed that owing to a technological malfunction in May, around 84,000 loans were released without client authorisation.

Due to this matter, the bank had to terminate a few of its employees.

Subsequently, the stock dropped by 12% that day.

Back then, the stock was also under pressure about its micro financial institute's (MFI) asset quality stress.

The sole flaw with the entire scenario was a lack of credit underwriting/risk management and shareholder communication.

Well, that case is back in the news again, which has impacted the share price of the bank lately.

Since the publication of this news, IndusInd Bank's shares have shown a bearish trend. Analysts don't see an escape from it.

The bank has been in the news for deficiency in compliance reasons too. Earlier this month, the RBI had imposed a penalty on IndusInd as it failed to adhere to customer due diligence procedure in the accounts opened using OTP based e-KYC, in non-face-to-face mode.

#3 Changes in Shareholding Pattern

Monitoring shareholding activity can help you better assess the prospects of a company.

While some activities, such as increasing stake, are positive indicators, others, such as pledging shares, or selling stake may often be counted in a negative sense.

IndusInd Bank has experienced a great deal of selloff not only from its promoters but also from mutual funds and FIIs lately.

Total promoters' stake in IndusInd Bank decreased by 0.01% in the quarter ended June 2022, to 16.51%, from 16.52% in March 2022.

Meanwhile, mutual funds reduced their holdings by 1.38%.

FIIs also reduced their holding from 46.33% to 45.83% in June 2022.

For more, check the latest shareholding pattern of INDUSIND BANK.

How has IndusInd Bank performed lately?

IndusInd Bank has declined by more than 20% in the year gone by. It is currently trading at Rs 807 as compared to Rs 1,009 a year ago.

It has a 52-week high of Rs 1,242 touched on 18 October last year and a 52-week low quote of Rs 763 which it hit last month.

As of 31 March 2022, promoters owned 16.5% of the bank, while FIIs owned 46.3% and DIIs owned 21.8%.

At the current price, IndusInd Bank trades at a PE multiple of 13.03 and a price to book value multiple of 1.28.

About IndusInd Bank

IndusInd Bank, incorporated in 1994, is a Mumbai-based new-generation Indian bank. Commercial, transactional, and electronic banking goods and services are available from the bank.

Manmohan Singh, then Union Finance Minister, launched IndusInd Bank in April 1994. IndusInd Bank is the first of India's new-generation private banks.

The bank focuses on retail banking services and is seeking to grow its branch network across the country.

Its technical platform allows for multi-channel distribution. IndusInd Bank has branches/banking outlets and ATMs scattered in 760 geographical regions in the country.

To know more about IndusInd Bank, check out its factsheet and quarterly results.

You can also compare IndusInd Bank with its peers.

IndusInd Bank vs Axis Bank

IndusInd Bank vs HDFC Bank

IndusInd Bank vs ICICI Bank

IndusInd Bank vs Yes Bank

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