HDFC Bank shares fall 6% after part-time chairman Atanu Chakraborty quits

Shares of HDFC Bank Ltd., one of the biggest constituents of the Nifty 50 and Nifty Bank index, fell as much as 9% on Thursday, March 19, after its part-time Chairman and independent director, Atanu Chakraborty quit and Keki Mistry, the former CEO of HDFC Ltd., was appointed as the interim part-time chairman, with approval from the Reserve Bank of India.In his resignation letter, Chakraborty wrote that certain happenings and practices within the bank that he observed over the last two years were not in congruence with his personal values and ethics. “This is the basis of my aforementioned decision,” he wrote.

Chakraborty went on to thank the bank’s independent directors, noting that there is a great amount of energy and verve in the middle and junior levels of the bank. “(This) should form the core of a reimaged organization. I also place on record my sincere appreciation for Secretarial, Compliance, Audit, and Group oversight functions,” Chakraborty’s letter stated.Among the top management, executive director Bhavesh Zaveri’s term ends in April and he has not sought reappointment, as per the lender’s filing earlier this year. Zaveri is part of the promoter group at Aurionpro Solutions, who is a tech vendor to the bank.

Sources with knowledge of the matter told CNBC-TV18 that the RBI expressed discomfort with the continuation of Zaveri on the board of the lender.

Chakraborty had joined the board of HDFC Bank

in May 2021, having been a secretary in the Ministry of Finance, an alternate governor on the World Bank Board and also a Chairman of the National Infrastructure Investment Fund (NIIF). He was a Gujarat Cadre IAS officer.Reacting to these developments, the US-listed shares of HDFC Bank or ADRs, fell over 7% overnight, before gaining 1% in extended trading.

Brokerage firm JPMorgan maintained a “neutral” rating on HDFC Bank with a price target of ₹1,090, stating that Chakraborty’s exit adds to the macro headwinds, along with a hit to sentiment with elevated volatility in the near-term.

“We believe that the stock is likely to trade weak following the resignation announcement, with impact further amplified by a softer macro backdrop amid geopolitical uncertainties,” the brokerage wrote.

JPMorgan went on to add that the reasons for resignation do raise some concerns about potential material disagreements between the board and the company’s leadership, risking board-management cohesion, and in-turn, future decision-making and execution.

Shares of HDFC Bank are trading 5.4% higher in early trading on Thursday, recovering from the pre-open lows. The stock had ended 0.4% lower on Wednesday as well.

(With Inputs from Furquan Moharkan)

Also Read: HDFC Bank Exclusive: Atanu Chakraborty exit not linked to bank’s conduct, regulatory concerns, sources say