HDFC Bank Shares In Focus: HSBC Cuts Target Price, Says Atanu's Exit An 'Overhang'— Should You Buy, Sell, Or Hold?

Shares of HDFC Bank will remain in focus on Monday, March 23, as HSBC Global Investment Research has maintained a ‘buy' rating on the stock while cutting the target price following the resignation of its interim chairman, Atanu Chakraborty. 

The brokerage has set a target of Rs 990, down from Rs 1,070. The new target indicates a 26.8% upside from the previous close of Rs 780.45 on BSE.

Calling Chakraborty's exit a matter of difference of opinion, HSBC in its recent note, expressed confidence that there are no governance concerns or lapses in internal controls or risk management at HDFC Bank. The former chairman's statement, however, is expected to remain an overhang for some time, it added.

How will the exit impact HDFC Bank's financials?

According to the brokerage, Chakraborty's resignation is expected to have an impact on HDFC Bank's relative valuation compared to ICICI Bank and Axis Bank, even though it is unlikely to impact any performance metrics of India's second-largest lender.

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What should HDFC Bank do?

HSBC said that HDFC Bank will have to initiate measures such as appoint a new chairman and an independent director soon, give clarity on top management roles, and implement the organisational structure change highlighted in the analyst call.

 The lender should also show strong performance metrics and communicate a strategy to improve the bank's relative performance versus other large private peers, if possible.

Atanu Chakraborty's resignation

HDFC Bank's part-time chairman and independent director, Atanu Chakraborty, resigned from his role on March 18. In a letter to the Board of Directors, he said, "Certain happenings and practices within the bank, that I have observed over the last two years, are not in congruence with my personal values and ethics." 

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Following the announcement, the lender, in a public call, clarified that there was no material governance concern, and it had not received any explicit reason from the former chairman for his decision.

HDFC Bank's share slipped more than 5% on Thursday after Atanu Chakraborty resigned as chairman. The stock dropped 5.13% to settle at Rs 799.70 on the BSE, narrowing some of its sharp early losses. The shares nosedived as much as 8.41% to Rs 772 during the day, marking its 52-week low. The stock tumbled 5.31% to close at Rs 798.20 on the NSE. It crashed 8.66% intra day to hit the 52-week low of Rs 770.

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