After a tumultuous day, where HDFC Bank’s management and board tried to calm investor sentiment, following Atanu Chakraborty’s abrupt exit from the bank, the stock again took a hit on Friday. It fell 2.41 per cent, underperforming the broader market, which rose 0.44 per cent. Shares of the bank closed at ₹780.45 on the BSE.
In the last two days, the bank’s shares have tumbled close to 7.5 per cent, wiping out nearly ₹1 trillion in market capitalisation (mcap).
Late on Wednesday, the bank informed the exchanges that Chakraborty had resigned as part-time chairman, saying some of the practices in the bank were not in congruence with his values and ethics.
Following that, Keki Mistry was appointed interim part-time chairman of the bank with Reserve Bank of India (RBI) approval. Mistry, on Thursday, tried to assuage investor concerns and reiterated that there are no material matters at this point in time, with respect to the bank.
“The bank operates with strong governance standards, robust internal controls and an extremely experienced management team. Our strategic direction, business priorities and execution capabilities continue to remain as always,” he said.
“I would not have taken on this responsibility at the age of 71 if it did not align with my principles and my level of integrity that I would expect from the bank,” Mistry emphasised on a call with analysts and press on Thursday. According to a Motilal Oswal note, the development (with HDFC Bank) has dampened investor sentiment and comes at a time when the markets are already grappling with lot of macro-uncertainty.
However, assurances from the management, Mistry’s appointment as interim chairman, and RBI’s endorsement of the bank’s corporate governance and compliance standards have helped assuage some concerns. “Going ahead, we believe appointment of the new chairman and the submission of Shashidhar Jagdishan’s name for the next chief executive officer (CEO) term (term due in October 2026) will help restore investor trust,” the report said. It added that the improved operating performance in the coming year will be critical to stock performance.
“There is a period of uncertainty till we get RBI approval for the CEO which is coming up for renewal in October 2026,” said Suresh Ganapathy, managing director (MD), head of Financial Services Research, Macquarie Capital, in a note on Friday. In a report on Thursday, Ganapathy had stated that Macquarie had removed HDFC Bank from its “marquee” buy list.
“Near-term underperformance may remain, while fundamentals are strong with good return on assets (ROA). At this point in time, governance concerns will weigh down heavily on the stock. Investors would want more comfort from the board. Also, now the uncertainty surrounding Sashi’s reappointment will weigh down on the stock,” he said in his report.
Ganapathy added that key risks include slowdown in growth and further governance issues.
“Though the management and the board assured of no governance, operational, regulatory or power struggles, we believe the bank must curb management exits and rebuild leadership strength either internally or externally. It should also swiftly clarify on the current MD and CEO’s term extension beyond October 2026 or place a succession plan to reduce management uncertainty,” Emkay said in a note.
Governance uncertainty and leadership visibility gap are likely to keep the stock under pressure in the near term, said Nomura in a report.
It added that the key monitorables will be appointment of permanent chairman, clarity on CEO reappointment/succession, absence of further exits, and continued execution delivery post-merger.
