HDFC Bank-Lilavati Trust Dispute: What Should Investors Do?

HDFC Bank has been in the headlines for the past few days and for all the wrong reasons. The ongoing feud between the Mehta family-owned Lilavati Kirtilal Mehta Medical Trust (LKMM Trust) and HDFC Bank has had little impact on its stock price. This new development has cast a shadow on the upward trajectory of the lender's shares.

HDFC Bank shares, along with other banking stocks, have lately been in an uptrend following the Reserve Bank of India's (RBI) aggressive 50 basis point repo rate cut in the June Monetary Policy Committee (MPC) meeting. However, market experts largely believe that this development is barely going to affect the bank's share price. Over the last two sessions, till June 10, following fraud allegations, HDFC Bank shares have declined by a mere 0.67 per cent.

On Monday, June 9, it closed flat-to-positive after trading in the positive territory throughout the session. On June 10, it slipped 0.69 per cent to close at Rs 1,965.30 per share on the National Stock Exchange (NSE). In today's trade, June 11, the bank's shares traded slightly in the red, around 0.2 per cent lower at Rs 1,962.40 apiece on the NSE.

Mehta Family Allegations Against HDFC Bank

On June 7, the LKMM Trust, led by the Executive Director of Lilavati Hospital, Param Bir Singh and the permanent trustee of Lilavati Kirtilal Medical Trust, Prashant Mehta, held a press conference, during which they pressed multiple allegations against CEO and MD Sashidhar Jagdishan and the former trustees of the board Chintan Mehta, Niket Mehta and Rashmi Mehta.

During the press conference, the Trust issued a "summary of misdeeds" of CEO Jagdishan. The allegations ranged from "bribe money" to "forging evidence".

The Trust claimed that Rs 2.05 crore was paid as a bribe to HDFC Bank MD and CEO Sashidhar Jagdishan to help the Chetan Mehta group illegally stay in control of the LKMM Trust. The Trust also claimed the former trustees did favours for the HDFC Bank MD and CEO. They claimed that in exchange for these favours, the MD and CEO then actively pursued the permanent founder trustees, initiating legal action against them for an unpaid loan. The Trust even went on to suggest that this relentless pressure ultimately contributed to the passing of Kishor Mehta, a permanent trustee who was already battling a serious health ailment.

HDFC Bank Denies Allegations

However, HDFC Bank termed the allegations as baseless and said that the allegations were an attempt to prevent the recovery of a long outstanding loan by the Trust.

"HDFC Bank Limited and its senior officials are being targeted by unscrupulous persons who are abusing the legal process to thwart the recovery of the long outstanding loan due to HDFC Bank from recalcitrant defaulters i.e., Splendour Gems Limited (formerly known as Beautiful Diamonds Limited)," the bank said in a press release a day after the allegations were levelled.

The bank claimed that Splendour Gems, a company owned by the Mehta family, owed the bank a total of Rs 65.22 crore as of May 31, 2025. Further, the bank said it "unequivocally rejects and strongly condemns" the allegations.

What Should Investors Do

Vaqarjaved Khan, Sr Fundamental Analyst, Angel One told Outlook Money: "HDFC Bank's stock has shown little reaction following the bank's clarification on recent allegations. Meanwhile, after the RBI cut repo rates by 50 basis points in its latest policy, the bank lowered its MCLR by 10 basis points across all tenures, from overnight to three years, bringing rates down to 8.9–9.1 per cent."

Khan noted that strong deposit growth and the rate cut should support loan expansion and help maintain net interest margins. However, despite projected earnings growth of 10–12 per cent over FY26–27 and strong return ratios (ROA of 1.9 per cent and ROE of 19 per cent), the stock remains priced at a premium compared to peers, offering limited upside.

Avinash Gorakshakar of Profirmart Securities, said, "I believe that recent developments in HDFC Bank are unlikely to create any major panic as the bank's management has denied all the claims made here and this in no way will affect the banks financials going ahead."

Looking ahead, Gorakshakar recommended to stay invested in the stock. "Long term investors need not worry while in the near term there could be some volatility here," he said.