“Mr Puri highlighted that there is substantial depth in the management, at least in three levels,” analysts from investment bank Nomura had written at the time.
HDFC Bank on Thursday said a six-member committee has been set up to identify a successor to Aditya Puri, whose tenure as the managing director and CEO of the bank ends in October 2020. The move was somewhat surprising, banking sector watchers said, because Puri reportedly prefers a bank insider. “If my replacement wants to be mentored for one year, I don’t want that replacement. At best we want someone who needs 15 days to catch up,” he was reported to have said at HDFC Bank’s last annual general meeting (AGM) on July 12.
Puri first addressed the succession issue publicly when he hinted, at an interaction with banking analysts in May 2018, his successor could be picked from within the organisation. He, however, did not rule out the possibility of an outsider taking charge.
“Mr Puri highlighted that there is substantial depth in the management, at least in three levels,” analysts from investment bank Nomura had written at the time. Puri had said then the management intends to start the process of identifying a successor 18-24 months ahead of his retirement, and plans to have a 12-month overlap period with the new successor.
The committee comprises entirely the bank’s board members — chairperson Shyamala Gopinath, Sanjiv Sachar, MD Ranganath, Sandeep Parekh, Srikanth Nadhamuni and Keki Mistry. HDFC Bank’s intention to invest in technology infrastructure has raised expectations that the new chief could be a tech hand rather than a career banker. The bank’s view in recent years has been that brand loyalty will hold only finite appeal for customers. To build and retain a strong customer base, it would have to focus on consistency of experience and innovation. The payback period for its investments in operations across core banking applications and user interface could range anywhere between “a few weeks to a few years”.
Mistry will represent Housing Development Finance Corporation (HDFC) on the committee. Puri will be an adviser to the search committee. “The search committee, over the next few months, shall evaluate internal and external candidates to ensure smooth transition,” HDFC Bank informed stock exchanges on Thursday.
HDFC Bank is among the most valuable companies in India and investors have been seeking clarity on Puri’s successor for a while as a seamless transition would be critical for the bank’s continued growth. It has been on the minds of many investors for over a year now, given that the bank has not known another chief in its 25-year history.
Total deposits with HDFC Bank grew at a compounded annual growth rate (CAGR) of 35.4% between FY1996 and FY2019 and advances rose at 45.7% in the last 24 years through FY19. The bank’s market capitalisation has grown 35.4% CAGR to Rs 6.93 lakh crore over the last 23 years. During the same period, profits grew 53% to Rs 21,078 crore at the end of FY19.