HDFC Bank Ltd. shares rose around 2% in early trade on Monday as investors digested news that CEO Sashidhar Jagdishan will not seek reappointment, with analysts saying an expedited search for a new CEO will reduce uncertainty.
The shares, which were about 40% foreign-owned as at June-end, are down about 26% so far this year.
Jagdishan’s tenure was marked by resilient asset quality and the successful stitching-together of one of corporate India’s largest mergers, though returns to shareholders and profitability metrics have lagged, noted Macquarie.
Jagdishan was appointed as CEO in October 2020, and oversaw the merger of HDFC Bank with then-parent Housing Development Finance Corp. Ltd. during his nearly six-year tenure, creating one of India’s largest financial services firms.
The lender is likely to name Deputy Managing Director Kaizad Bharucha as one of two options for its next CEO, two people familiar with the matter said, adding it is also looking for an external candidate as per central bank rules.
“We believe a transition to a new CEO is a better outcome as the focus shifts to strengthen governance, execution and the Bank’s overall franchise and image, which has been impacted by the recent negative news flow around product mis-selling/ business overreach,” Antique Stock Broking said in its note.
An expedited and timely appointment of a new CEO could help reduce the overhang of uncertainty, according to J.P. Morgan analysts.
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