IndusInd Bank hits lowest level since January 2017, slips 16% in 8 days

Shares of IndusInd Bank slipped 5 per cent to hit a fresh over three-year low of Rs 1,118 on the BSE on Friday despite the bank’s clarification that its exposure to the telecom company is standard.

The private sector lender's stock was trading at its lowest level since January 05, 2017. In the past eight trading days, IndusInd Bank's stock price has slipped 16 per cent, as compared to a 1 per cent decline in the benchmark S&P BSE Sensex.

Investors have lost Rs 15,000 crore after a sharp fall in share price of the bank during the period. IndusInd Bank’s market capitalisation has declined to Rs 77,520 crore in the intra-day trade today, from Rs 92,536 crore as on February 6, 2020.

The stock price declined despite bank’s clarification that it has exposure of Rs 995 crore in telecom company, which is standard. The bank also has a non-fund exposure in the nature of Bank Guarantees of Rs 2,409 crore. The entire exposure is secured.

“We wish to state that the report on the Bank's exposure to the telecom company referred to is factually incorrect,” IndusInd Bank said on clarification in reference with the news article in The Economic Times dated February 15, 2020 titled 'Banks fear surge in bad loans'.

Meanwhile, on February 11, rating agency Moody’s downgraded the private lender’s outlook to negative from stable on account of the risk of further asset quality deterioration.

“Over the last few quarters, the bank has seen deterioration in its asset quality, particularly in the corporate segment. Tight refinancing conditions for borrowers were a key trigger for the crystallization of nonperforming loans (NPLs),” Moody's Investors Service said.

Refinancing conditions remain tight, especially for weaker borrowers. In particular, the bank has a relatively higher exposure to real estate compared to other banks (at around 8 per cent of its loan book on December 31, 2019. While there have been no NPLs in this segment so far, this exposure to the property market remains a source of risk, given the broader stress in the real estate sector. The bank could also be negatively impacted by the ongoing stress in the telecommunications sector, it said.

The ratings agency did mention that it is unlikely to upgrade the bank’s ratings over the next 12-18 months. An upgrade trigger would be if the bank maintains its NPA ratios at current levels and shows decreased credit costs.