IndusInd Bank shares sink 3% after CEO Sumant Kathpalia resigns, Emkay downgrades to 'reduce'

By Admin

30 Apr, 2025

Private sector lender IndusInd Bank is under intense scrutiny following the sudden resignation of its CEO and Managing Director, Sumant Kathpalia, just a day after Deputy CEO Arun Khurana stepped down. The bank’s stock reacted sharply, plunging nearly 3% in early trade on Wednesday, April 30, 2025, with shares quoted at ₹816.90 on the NSE at 9:20 AM.

Leadership Crisis Deepens

Kathpalia’s resignation marks a significant development, coming at a time when the bank is already battling questions over discrepancies in its derivatives portfolio. In his resignation letter, Kathpalia stated, “I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice. I would request that my resignation be taken on record at close of working hours today.”

This move follows the Reserve Bank of India’s recent decision to extend Kathpalia’s tenure by just one year, instead of the three-year term proposed by the bank — an early sign of regulatory hesitation.

Fallout from Derivatives Misreporting

The twin resignations come in the wake of revelations surrounding accounting lapses in the bank’s internal derivative trades. The bank disclosed that the discrepancies would have a negative impact of ₹1,979 crore, translating to an adverse post-tax impact of 2.27% on the bank’s net worth as of December 2024. Earlier estimates placed the damage at approximately 2.35% of the net worth.

On April 28, Deputy CEO Arun Khurana, who oversaw the Treasury Front Office function, resigned stating, “Considering the recent unfortunate developments... I hereby resign, effective immediately.”

Board Promises Accountability

In response, the IndusInd Bank Board stated on April 26 that it is taking "necessary steps" to fix accountability and realign the responsibilities of senior management. These measures are expected to restore confidence among stakeholders, but the damage to sentiment seems to have already set in.

Emkay Downgrades to 'Reduce'

Domestic brokerage Emkay Global has downgraded IndusInd Bank’s stock to 'reduce' from 'add', citing increased risk from leadership turmoil and business disruption. Emkay warned that:

• Top management exits could trigger a second round of deposit run-down
  
  

• Concerns may rise over asset quality and middle-management attrition
  
  

• Possibility of RBI appointing a nominee on the Board or a PSU banker as CEO, as seen in cases like Bandhan Bank and RBL Bank
  
  

• The CEO/ED hiring process may take 3–6 months for RBI approval, affecting business continuity
  
  

Emkay concluded that the risk-reward ratio for IndusInd Bank looks unattractive at current valuation levels, especially compared to peers.

Final Thoughts

IndusInd Bank now faces the dual challenge of stabilizing internal operations and rebuilding investor confidence. The resignation of two top executives, along with a significant hit to its financials, signals a period of uncertainty for the lender. Investors are advised to tread carefully and monitor further developments closely.