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On Friday, Investec (LON:INVP) analysts downgraded IndusInd Bank (NSE:INBK) Ltd (IIB:IN) from Hold to Sell, adjusting the price target to INR650 from INR700. The downgrade follows the bank’s disclosure to exchanges about newly discovered accounting discrepancies. IndusInd Bank’s internal audit department identified approximately INR 6.8 billion of incorrectly recorded interest income over the first nine months of the fiscal year 2025, which has now been fully reversed in January 2025, impacting the fourth quarter.
Additionally, the bank found unsubstantiated balances totaling INR 6 billion in the ’other assets’ category, which have been offset against corresponding ’other liabilities’ in the same month. These revelations come after the bank had previously reported overestimated income from derivatives, resulting in a significant INR 19.6 billion impact, equivalent to 2.3% of the bank’s book value on a post-tax basis.
The series of financial irregularities has led to notable changes in the bank’s senior leadership, with the CEO, Deputy CEO, and CFO exiting the institution in April 2025 and January 2025 respectively. Investec’s analysts expressed concern over the current period of heightened uncertainty at IndusInd Bank, which is expected to lead to structural impairments in its core profitability and business growth.
The revised price target of INR650 is based on a valuation of 0.6 times the bank’s expected book value for the fiscal year 2027. Investec’s stance reflects caution amid the challenges faced by IndusInd Bank, suggesting potential risks for investors.
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