HDFC Bank shares rise 3% as brokerages retain Buy calls; cut target prices after Jagdishan exit plan

Shares of HDFC Bank rose nearly 3% in early trade on Monday after brokerages retained their bullish stance on the country’s largest private sector lender despite managing director and chief executive officer Sashidhar Jagdishan’s decision not to seek reappointment.

HDFC Bank shares gained as much as 2.71% to ₹739.50 on the BSE, from Friday’s close of ₹720. At the day’s high, the lender’s market capitalisation rose to around ₹11.31 lakh crore. At the current level, HDFC Bank shares were around 27% below their 52-week high of ₹1,020.35. The stock had touched a 52-week low of ₹706.35 on August 28.

The stock gained momentum after Motilal Oswal Financial Services, Jefferies, ICICI Securities and Axis Capital retained their ‘Buy’ ratings, although Jefferies and ICICI Securities lowered their price targets to factor in uncertainty around the leadership transition.

Brokerages retain Buy, cut target price

Motilal Oswal retained its ‘Buy’ rating and set a target price of ₹925, saying HDFC Bank is entering a new phase of leadership transition after a series of adverse developments, challenges in operating performance following its merger with HDFC Ltd and significant erosion in shareholder wealth in recent years.

The brokerage believes a change in the leadership team could help address the scepticism surrounding the bank and improve investor sentiment.

“We estimate HDFCB to deliver an improved earnings performance from FY28 onward,” Motilal Oswal said. It expects the bank’s profit after tax growth to recover to 14% year-on-year in FY28, compared with an average of 9% during FY24-FY27.

The brokerage expects operating performance to improve from the second half of FY27, with earnings growth moving into the mid-teens in FY28 after a relatively sluggish period.

Jefferies retained its ‘Buy’ call but cut its price target to ₹880 from ₹1,050 and lowered its earnings estimates for FY27-FY29 by 3% each.

The brokerage cautioned that the leadership transition could affect revenue momentum, particularly deposit mobilisation and fee income. Greater uncertainty could also increase HDFC Bank’s cost of equity and weigh on its valuation, it said.

ICICI Securities also retained its ‘Buy’ rating but reduced its target price to ₹920 from ₹1,020. It lowered the target valuation multiple to around 1.8 times from 2 times earlier to account for uncertainty over the appointment of the next MD and CEO.

Axis Capital also maintained its ‘Buy’ rating with a target price of ₹1,030. It said the decision removed concerns about the possibility of a shorter second term for Jagdishan and cleared the way for a successor who could potentially serve a full three-year tenure.

Potential candidates for Jagdishan’s successor

The succession process is now likely to be the key focus for investors, with the HDFC Bank board expected to consider both internal and external candidates.

Deputy Managing Director Kaizad Bharucha is among the leading internal contenders. Bharucha has been with HDFC Bank for 26 years and has served as an executive director since 2014, handling diverse portfolios across the bank.

However, his long association with the bank could pose a challenge. Motilal Oswal noted that the 15-year cap on board membership could restrict Bharucha’s ability to serve a full three-year term unless he receives an exception from the Reserve Bank of India.

Executive Director V. Srinivasa Rangan, a former CFO of HDFC Ltd, is another potential candidate. However, at 66, his age could limit his tenure as MD and CEO given the 70-year age cap.

Chief credit officer Jimmy Tata, who has been associated with HDFC Bank for more than three decades, could also emerge as an internal contender, Motilal Oswal said in its report.

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