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Can HDFC Bank join Rs 10 lakh crore market-cap club during the new MD's tenure?

Today the bank is valued at Rs 6.7 lakh crore in terms market capitalisation, which increased from just Rs 440 crore in 1995.

October 28, 2020 / 01:59 PM IST
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HDFC Bank has always been favourite among investors. Recently, there has been a change at the biggest private sector bank by market-cap. Aditya Puri retired as MD & CEO of the bank on October 26 after a 25-year journey.

Sashidhar Jagdishan has taken over Puri at the bank.

Today, the bank is valued at Rs 6.7 lakh crore in terms market capitalisation, which was just Rs 440 crore in 1995.

The country's largest private sector lender achieved Rs 10,000 crore in market-cap in 2003, Rs 1 lakh crore in 2010, Rs 2 lakh crore milestone in 2014, Rs 3 lakh crore in 2016, Rs 4 lakh crore in 2017, Rs 5 lakh crore in 2018, and Rs 6 & 7 lakh crore in 2019.

Aditya Puri created strong structure and system for HDFC Bank, which has not failed even in times of crises. The bank increased its deposit share to 7 percent now with over Rs 13 lakh crore of asset size given the trust created among depositors.

The stock has given 303-fold return in Puri's tenure.

Experts feel HDFC Bank can join the Rs 10-lakh-crore club, in terms of market capitalisation, during the tenure of Sashidhar Jagdishan, who took over as the MD & CEO of the bank with effect from October 27. Oil-telecom-to-retail major Reliance Industries and India's largest IT company TCS are the only two firms that have crossed Rs 10 lakh crore in market-cap.

"Aditya Puri and his team have built a very strong fort and this is the reflection of years of continuous efforts and dedication. As Sashi is with bank since 1996, he will run the existing business process well and improve also, hence we believe HDFC Bank market cap would cross Rs 10 lakh crore under his tenure," Jaikishan Parmar, Senior Equity Research Analyst at Angel Broking told Moneycontrol.

Fund managers owned more than Rs 78,000 crore worth of holding in HDFC Bank and that is largely due to bank's strong liability franchisee, deepening presence in digital banking, continuous decline cost to income ratio and target of 35 percent in 3 to 5 years, historical return on equity (RoE) greater than 15 percent, bank has a provision that is higher than regulatory required which provides comfort against any asset quality shock.

"Being a high weightage stock in most benchmark indices and being the highest weight stock in the highest weight financial sector along with outperforming the peers in terms of Balance sheet structure and Profitability, HDFC bank has been the favourite essential of most mutual fund schemes.

Vineeta Sharma, Head of Research at Narnolia Financial Advisors feels that with the recent move towards tapping the rural & semi urban market, HDFC Bank can consistently increase its market share further and can still double the balance sheet over the next 5-6 years.

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Sunil Shankar Matkar
first published: Oct 28, 2020 01:59 pm