As India's biggest private lender HDFC Bank submits names for its next MD and CEO, brokerage Nuvama Research prefers internal appointement over picking external candidates.
According to the brokerage, an internal succession through the lender's second-in-command executive, Deputy MD Kaizad Bharucha, even potentially for a shorter tenure of around 2.5 years, would be preferable. This is expected to ensure strategic continuity, reduce disruption and allow the lender to focus on recovering operating performance post the merger drag, while giving enough time to identify and groom a longer-term successor.
Earlier, sources told NDTV Profit, HDFC Bank may ask Bharucha, to take over the post of MD, CEO after bank chief Sashidhar Jagdishan refused to seek another term. HDFC Bank on Saturday informed the exchanges it has submitted names of two candidates for the position of MD & CEO.
While focusing on MD & CEO succession, the brokerage retained a long term Buy on the stock.
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Risks Of External Appointment
Nuvama indicated that Citi's India CEO K Balasubramanian is among the prominent external candidates has been repoertedly considered the MD & CEO position, along with HSBC India CEO Hitendra Dave and ICICI Prudential Life's Anup Bagchi.
Balasubramanian served for a short tenure in the corporate banking space at HDFC Bank earlier in his career, where he reported to Bharucha. Eventhough Balasubramanian familiarity with the lender could possibly be positive for the lender, Nuvama expects that his acceptance within the organisation as MD & CEO could be challenging, given the earlier reporting relationship, and may potentially result in higher-level attrition.
Additionally, the approval and appointment of an external candidate is expected to take time, hence extending uncertainty over leadership.An external transition also includes the risk of business reset, strategic recalibration and senior-management attrition, at a time when HDFC Bank is already working through the merger-related drag, teh brokerage noted.
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