HDFC Bank Shares Tank Nearly 9% In Early Trade After Bank Chairman Resigns Citing ‘Ethical Concerns’

Shares of HDFC Bank were trading over 4 per cent down from the previous session, after part-time Chairman and Independent Director of the bank, Atanu Chakraborty, resigned on March 18, citing ethical concerns in the bank. Shares of the bank dropped around 9 per cent in early trade, but recovered slightly as investors looked to pick up shares of India’s largest private sector bank at a discount.

“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. This is the basis of my aforementioned decision,” Chakraborty said, in a letter to the Chairman of Governance, Nomination, Remuneration Committee of the bank on March 18.

The bank’s US-listed shares or American Depositary Receipts (ADRs) also fell over 7 per cent overnight following the development. On Indian stock exchanges, HDFC Bank shares fell below the 52-week low of Rs. 812, trading currently at Rs. 806.25 on the NSE. Shares of the bank have tanked well over 11 per cent over the past month, amid broader market volatility due to the Iran war.

Chakraborty joined the private sector bank in May 2021 and was with the bank during the mega merger of the bank with HDFC Ltd. “HDFC Bank is an organisation I nurtured for 5 years. I am not pointing out any wrongdoings at the bank. My ideologies did not match with the organisation, and hence it was time to part ways,” Chakraborty told NDTV Profit after his exit.

HDFC Bank, in an exchange filing after Chakraborty’s resignation, said, "We confirm that there are no reasons other than those mentioned in the said letter, for the resignation of Chakraborty. Further, Chakraborty does not hold directorship in any other company. The Board of Directors places on record its appreciation for Chakraborty's contribution to the bank during his tenure and wishes him all the success in his future endeavours.”

Keki Mistry took over as the interim part-time chairman of the bank for three months from March 19. Mistry had served as the vice-chairman of HDFC Ltd before its merger with HDFC Bank in 2023.

HDFC Bank, which has one of the highest weightages in the Nifty 50 and Nifty Bank index, led to a drop in both indices on March 19. The Nifty 50 index was trading 2.3 per cent lower at 23,244.25 on March 19. Meanwhile, the broader Nifty Bank index was trading 2.7 per cent down at 53,856.55 at the time of writing.

“We believe that the stock is likely to trade weakly following the resignation announcement, with impact further amplified by a softer macro backdrop amid geopolitical uncertainties," JP Morgan said in a note. However, the brokerage maintained a ‘neutral’ rating on the bank with a target price of Rs. 1090 per share.