The HDFC Bank share price remains in focus. The shares are down another 1% in early Friday trade after the sharp cut yesterday. However, domestic brokerage house Motilal Oswal believes that the “assurance from the management team, Mistry’s appointment as an interim chairman, and the RBI’s endorsement of the bank’s corporate governance” would help assuage some of the concerns
Motilal Oswal has retained a ‘Buy’ rating on HDFC Bank and set a target price of Rs 1,100 for HDFC Bank. This implies an upside of 38% from current levels. The brokerage pointed out that “the swift regulatory engagement and interim leadership appointment do provide comfort on operational continuity.”
Motilal Oswal on HDFC Bank: Maintains earnings estimates
The brokerage has also maintained its earnings estimates for HDFC Bank and expects the bank’s return on assets (RoA) to reach 1.9% and return on equity (RoE) to reach 14.5% by FY27.
Motilal Oswal noted that “Going ahead, we believe the appointment of the new Chairman and the submission of Sashi Jagdishan’s name for next CEO term (term due in Oct’26) will help restore investor trust.”
Following the resignation of Chakraborty, the board has appointed Keki Mistry as the interim Chairman for the next three months. The Reserve Bank of India (RBI) approved his appointment and endorsed the corporate governance and compliance standards of the bank.
Assauging investor confidence
Motilal Oswal highlighted that the steps taken by the bank to assuage investor confidence and the RBI’s subsequent endorsement would also support the upmove in the share price.
Mistry unequivocally assured that the bank’s governance standards remain of the highest standards. Reiterating the point at the analyst call yesterday he emphasised that at the age of 71 he “would not have accepted the interim Chairman role unless the institution’s systems, processes, and ethical framework were fully aligned with his own principles.”
The brokerage believes that his strong emphasis that there are “no governance lapses” and expressing full confidence that the bank will “come out very clean,” would help gain investor trust.
The HDFC Bank board will, over the next few months, evaluate the appointment of a permanent Chairman in consultation with the RBI while engaging with Chakraborty to seek further clarity.
HDFC Bank share price
The share price of HDFC Bank has declined 1% in the early intraday session. The stock has declined 13.3% in the past one month. On a year-to-date basis, the stock has declined 20.2%.
Conclusion: HDFC Bank’s performance crucial for future stock movement
Apart from the management change Motilal Oswal said that the bank’s operating performance in the coming year will also be important for stock performance.
“The improved operating performance in the coming year will be critical to stock performance.”
Interestingly, another leading brokerage house, Jefferies, also believes that the correction in HDFC Bank offers a buying opportunity and sees around 47% upside in the stock from current levels. Jefferies has also maintained a ‘Buy’ rating on HDFC Bank and set a target price of Rs 1,240.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.