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Undergoing a leadership overhaul Board to evaluate both internal/external candidates for CEO role

* Mr. Sashidhar Jagdishan has decided to not seek his reappointment as MD & CEO of HDFC Bank and shall retire on 26th Oct’26. The board will thus fast-track the process of selection and appointment of his successor.

* With Mr. Jagdishan’s decision not to seek reappointment, along with the upcoming superannuation of CFO Mr. Srinivasan Vaidyanathan on 30th Nov’26 and other recent changes in the leadership team (please refer to Exhibits 3 & 4), the bank will witness several changes in the key management personnel. Mr. Bhavin Lakhpatwala, Head of Strategy and IR, has also resigned earlier in Jun’26 and joined RBL Bank as CFO. Mr. Puneet Sharma, former Axis Bank CFO, is scheduled to take charge as CFO-designate of HDFC Bank on 1st Sep’26.

* Mr. Rajiv Kumar, ex-Chief Election Commissioner and ex-Finance Secretary, has recently taken charge as the new Chairman of the bank after the sudden exit of Mr. Atanu Chakraborty. The decision on MD & CEO was amongst the key matters on which deliberations were going on at the senior most level and clarity was awaited by the street. HDFCB stock also corrected 18% in the past six months amid ongoing uncertainty.

* Mr. Kaizad Bharucha, Deputy MD, remains the key internal contender to succeed Mr. Jagdishan. Another potential internal candidate is Mr. Jimmy Tata, chief credit officer, who has been associated with the bank for more than 30 years. The board will also likely evaluate external candidates.

* The bank is thus entering a phase of leadership transition after a series of adverse developments, challenges in operating performance after its merger with HDFC Ltd, and significant erosion of shareholder wealth over recent years.

* The changes in its leadership team will help to address the skepticism that has engulfed the bank over the recent period. A new leadership team, alongside an improvement in growth and earnings trajectory, should improve investor sentiment. We estimate HDFCB to deliver an improved earnings performance from FY28 onward, while RoA should sustain at ~1.8%. We revise our TP to INR925 (1.8x FY28E ABV + INR128 for subs) and maintain our BUY rating.

Will a new leadership team bring about a change in the bank’s fortune?

HDFCB’s share price has significantly underperformed its peers over the last few years, with a tough adjustment period after the merger and recent concerns about governance after the sudden resignation of chairman, among other issues mentioned above. The stock price has declined by 25% in the past one year and 8% in the past five years. The overhaul in its leadership team will help to address the overhang and aid investor sentiment. We expect the bank’s operating performance to improve from 2HFY27 onward as we project earnings to grow in mid-teens in FY28E after sluggish trends over FY24-27E.

Board to likely evaluate both internal and external candidates

Mr. Bharucha, Deputy MD, has been with the bank for 26 years and has been an ED of the bank since 2014. He has managed diverse portfolios across the bank over this long stint and thus remains a prime candidate to succeed Mr. Jagdishan. However, given the cap of 15 years for board membership of a bank, it may restrict him to have a full three-year tenure and may need exceptional approval from the RBI. The current ED, Mr. V. Srinivasa Rangan, ex-CFO of HDFC Ltd, has already attained the age of 66 years, which may again limit his tenure as MD given a maximum age cap of 70 years. Mr. Jimmy Tata, chief credit officer, who has been associated with the bank for more than 30 years, could also be a potential candidate. Moreover, there is a high likelihood that the board will evaluate external candidates for the role; however, given limited time, the bank will need to fast-track the process.

Valuation and view: Reiterate BUY with a TP of INR925

HDFCB is entering a phase of leadership transition after a series of adverse developments, challenges in operating performance after its merger with HDFC Ltd, and significant erosion of shareholder wealth over recent years. The changes in its leadership team will help to address the skepticism that has engulfed the bank over the recent period. A new leadership team, along with an improvement in growth and earnings trajectory, should improve investor sentiment over the medium term. We estimate HDFCB to deliver an improved earnings performance from FY28 onward as we estimate PAT growth to recover to 14% YoY by FY28E vs. avg. 9% over FY24-27E. We revise our TP to INR925 (1.8x FY28E ABV + INR128 for subs) and maintain our BUY rating.

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