HDFC Bank's dollar bonds have fallen to record lows as CEO Sashidhar Jagdishan's unexpected decision to step down continues to weigh on investor sentiment. HDFC's dollar bond maturing in June 2031 dropped as much as 0.13 cents on the dollar to 98.504 cents, the lowest level since its issuance in June, according to Bloomberg-compiled data. The bank's US currency notes due in August 2029 and August 2031, issued last week, also declined to their weakest levels. Shares of HDFC Bank fell as much as 1.5% in Mumbai trading before paring losses, with the stock having lost about 28% this year, against a 3.3% decline in the Nifty Bank Index. The lender is reportedly seeking an executive search firm to fast-track the appointment of a new CEO, as reported by Bloomberg citing people familiar with the plan.
PL Capital has maintained its 'Buy' rating on HDFC Bank despite trimming the target price to ₹950 from ₹1,040, following CEO Sashidhar Jagdishan's announcement of not seeking reappointment. The brokerage reduced its valuation multiple to 1.9 times from 2.1 times to factor in the leadership uncertainty. PL Capital noted that the stock is attractive at 1.4 times March 2028E core ABV, representing a 30% discount to ICICI Bank, though it warned that near-term pressure may persist until succession clarity emerges. The brokerage emphasized that medium-term returns would hinge on strategy and execution, highlighting that while the exit would be negative, the bank's strong fundamentals remain intact.
Despite the leadership uncertainty, majority of analysts covering HDFC Bank have maintained 'buy' ratings on the stock following CEO Sashidhar Jagdishan's announcement of not seeking reappointment. Bernstein sees this as a net positive, stating it rules out the more feared scenario of a short, RBI-restricted term, and opens up a natural opportunity for the incoming leadership to reset the bank's narrative. JPMorgan maintains an 'outperform' rating with a price target of ₹1,150, though the brokerage believes the event could weigh on share price in the short-term. Macquarie holds an 'outperform' rating with a price target of ₹990, noting that the timing adds fresh uncertainty when investor confidence is already fragile. Nomura expects the stock to remain rangebound until clarity emerges on the next CEO, with a price target of ₹950. UBS has retained 'buy' with a ₹1,130 target, while Kotak Institutional Equities has 'buy' with a ₹1,050 target. According to Bloomberg data, 47 brokerage firms have a 'buy' rating on the stock, while two have a 'hold' call.
HDFC Bank has confirmed that Sashidhar Jagdishan, Managing Director and CEO, will retire on October 26, 2026, after nearly six years at the helm. Deputy Managing Director Kaizad Bharucha is widely expected to serve as interim CEO until a full-time successor is appointed. Brokerages see Bharucha as the most obvious internal candidate, but his permissible tenure as a whole-time director runs only until 2029, limiting his runway as CEO to only about two years and nine months. Another potential internal candidate is Jimmy Tata, Chief Credit Officer, who has been associated with the bank for more than 30 years. The bank's board is expected to consider both internal and external candidates, as it seeks to fast-track the appointment of a succession before Jagdishan's term ends on October 26. Jefferies identified Bharucha as a possible internal candidate but noted that his remaining tenure could be limited to around 2.8-3 years. Jefferies also flagged several possible external candidates, while warning that investors would closely watch for any senior-management exits during the transition. A Reuters report said V. Srinivasa Rangan and Bharucha were among the prominent candidates being considered for the top role, with the lender also evaluating external candidates as RBI regulations require banks to submit multiple names for CEO position consideration.
HDFC Bank's absolute returns over the week were down 2 per cent, while the stock was down nearly 5 per cent over the past month. On a year-to-date basis, the stock had dragged over 28 per cent. The stock traded at ₹711.90 on the NSE at 11.56 am on Tuesday, compared with its previous close of ₹709. At the time of writing, the buy quantity was recorded at 20,27,923, while the sell quantity stood at 22,88,611, indicating continued selling pressure. Sunny Agrawal, head of fundamental research at SBI Securities, said: "The CEO uncertainty at HDFC Bank is overshadowing a more fundamental issue: the bank's post-merger economics have not played out as expected." The merger with HDFC Ltd, completed in July 2023, significantly changed HDFC Bank's balance sheet and asset mix, with HDFC Ltd's housing finance business having a lower margin profile than the bank's traditional lending business.
Some of the likely external candidates as per brokerages include ICICI Pru Life CEO Anup Bagchi; HSBC India CEO Hitendra Dave; Banking head at Citibank K Balasubramanian; HDFC Life CEO Vibha Padalkar; Tata Capital CEO Rajiv Sabharwal; Axis Bank CEO Amitabh Chaudhry; and former HDFC Bank DMD Paresh Sukthankar. IIFL said a credible external candidate could instead provide a 'clean leadership reset and a longer runway to steer the bank'. The next challenge extends to the need to revive net interest income growth, improve margins and complete the post-merger balance sheet recalibration. Motilal Oswal expects the bank's earnings to improve from FY28, with profit growth recovering to 14% in FY28 from an average of about 9% over FY24-27. Jefferies cut its target to ₹880 from ₹1,050, but retained buy, reducing its FY27-FY29 earnings estimates by 3% each because of potential pressure on deposit mobilisation and fee income. Nomura noted that the stock could remain under pressure in the near-term until a credible successor becomes a catalyst for re-rating. FIIs ownership in the lender fell to 41.04% as of the June quarter from 52.37% in December quarter 2023, according to BSE data, showing continued foreign investor selling pressure.
