Shares of IndusInd Bank Ltd are under the spotlight on Thursday after the Securities and Exchange Board of India’s (Sebi) investigation revealed that top executives at the private lender were aware of discrepancies in its derivatives portfolio as early as December 2022, and yet chose to withhold this information from the public for over 15 months.

According to Sebi’s interim order, this prolonged delay gave several senior officials the opportunity to exit their stock positions before the eventual disclosure in March 2025, which triggered a sharp 27% drop in the bank’s shares in a single day.

Among those reportedly privy to the issue were CEO Sumant Kathpalia and other key executives, who were engaged in discussions about irregularities in derivative booking and margining months before the information became public, Sebi’s findings suggested.

Despite these early internal discussions, the bank only classified the matter as Unpublished Price Sensitive Information (UPSI) on March 4, 2025, just days before the public disclosure.

Sebi concluded that this delay violated regulatory norms and enabled insiders to offload shares, protecting themselves from heavy losses. The regulator has now launched an insider trading investigation into the matter.

The delay in properly classifying and disclosing the information is central to Sebi’s case. As part of its action, Sebi has barred five senior executives from accessing the securities market and frozen the profits earned from the alleged insider trades.

Sebi initiated a suo motu probe after IndusInd’s stock plunged 27% on March 10, 2025, following the revelation of accounting discrepancies worth Rs 1,529 crore in the bank’s derivatives portfolio.

Since then, IndusInd Bank shares have regained some ground, rising 32.92% from a 52-week low of Rs 605.40 reached on March 12. IndusInd Bank shares were trading 0.62% higher at Rs 809.75 on the Bombay Stock Exchange (BSE) at 9:42 am.

The 32-page Sebi order outlined how five IndusInd Bank executives sold shares between December 4, 2023, and March 10, 2025 after discovering the irregularities but before informing the public.

CEO Kathpalia sold 1.25 lakh shares, avoiding a potential loss of Rs 5.2 crore, while another executive, Khurana, offloaded over 3.4 lakh shares, sidestepping a Rs 14.30 crore loss.

Following these developments, ICICI Securities downgraded IndusInd Bank Ltd from ‘Hold’ to ‘Sell,’ lowering its target price to Rs 650 from Rs 720, marking a 17% cut.

The brokerage cited concerns over the bank’s uncertain outlook, projecting it will underperform the industry with a modest 8% compound annual growth rate (CAGR) and weak profitability, forecasting a return on assets (RoA) of less than 1% for FY25 to FY27.

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