HDFC Bank ADR Climbs 2.3% While New CEO Anup Bagchi Takes Charge of India's Top Private Lender Amid Shake-Up

Shares of HDFC Bank's American depositary receipts rose more than 2% in early trading Monday as India's largest private sector bank began a new era under a new chief executive.

The ADR, which trades on the New York Stock Exchange under the symbol HDB, gained 51 cents, or 2.30%, to $22.69 shortly after the opening bell.

In India, HDFC Bank's shares were little changed Monday at about 692.7 rupees, after rising 1.39% on Friday. Each ADR represents three ordinary shares.

The ADR gain came as Indian stocks rallied Monday, with the benchmark Nifty 50 index rising more than 1% led by a surge in Reliance Industries.

New leadership

HDFC Bank is in the midst of a major leadership transition. Anup Bagchi took over as managing director and chief executive on Oct. 27, succeeding Sashidhar Jagdishan, whose tenure ended at the close of business on Oct. 26.

Bagchi has more than 30 years of experience in banking, capital markets, wealth management and insurance, much of it at the ICICI Group. Most recently, he was managing director and CEO of ICICI Prudential Life Insurance.

Jagdishan led HDFC Bank from October 2020, steering it through the pandemic, regulatory restrictions on its digital activities and its July 2023 merger with its former parent, housing finance company HDFC Ltd.

Speaking on the bank's October earnings call before taking office, Bagchi said he would consult regulators, customers, shareholders and other stakeholders before setting priorities.

More changes

The leadership shake-up extends beyond the CEO. Sanjay D'Souza, the bank's group head for business banking and emerging and micro enterprises, retired on Oct. 31 after 27 years. Deputy Managing Director Kaizad Bharucha is also set to depart.

The changes follow the resignation of the bank's then-part-time chairman, Atanu Chakraborty, in March.

Challenges ahead

Bagchi takes charge at a difficult time. HDFC Bank's profit grew only 4.7% in the most recent quarter, and the bank faces pressure to improve profitability, strengthen low-cost deposits and integrate the larger post-merger business.

The bank has also faced scrutiny over governance. In May, The Indian Express published an investigative report alleging the bank disguised payments as marketing spending and describing an internal vigilance probe involving senior leadership. The ADR fell 4.1% after the report.

The ADR has been the subject of a U.S. shareholder class action lawsuit related to the allegations.

Shares well below highs

HDFC Bank's stock has fallen sharply over the past year. The ADR has traded between $21.71 and $35.58 over the past 52 weeks, meaning Monday's price is near the low end of that range.

In India, the stock is about 32% below its 52-week high. The bank's market value is about 10.7 trillion rupees.

The stock trades at about 13 times earnings, a relatively low valuation compared with its history.

India's banking giant

HDFC Bank is India's largest private sector bank by assets. JPMorgan Chase Bank, as the depositary for the ADRs, is the bank's largest registered shareholder.

Investors are waiting for Bagchi to lay out his strategy for the bank, including plans for growth, deposits, technology investment and loan quality.

How the new management team addresses governance concerns and improves profitability is likely to determine whether HDFC Bank's stock can recover from its steep decline.