Aditya Puri's astute leadership defined HDFC Bank in the last 25 years and it reflected in the share price that made several investors millionaires and continues to be a favourite pick.
From Rs 4 in 1995, the stock jumped to Rs 1,213 on October 26 (the adjusted price for all relevant corporate actions happened so far), the day MD & CEO Puri retired from HDFC Bank.
From October 27, Sashidhar Jagdishan takes over as the MD and CEO of the bank and the question everyone is asking is will the good run continue?.
The stock saw a 303-fold increase during Puri's 25 years with HDFC emerging as the largest private sector lender in the country by market capitalisation, total loan book and interest income. It not only emerged on top of the heap but also widened the gap with the closest rival ICICI Bank.
The increase in the share price has been incredible even higher than that of the country's biggest bank, State Bank of India (SBI), which grew more than 12-fold in the same period.
HDFC's market cap of Rs 6.67 lakh crore is double that of ICICI Bank and even higher than that of ICICI Bank and Kotak Mahindra Bank put together. In fact, it also beats State Bank of India, which has assets more than double—2.5 times—those of HDFC Bank.
The performance, standards and structure made for HDFC Bank by Puri also helped the lender get the highest weightage in the financial sector and the second-highest in the Nifty50.
Asset management companies through mutual funds schemes held more than Rs 78,000 crore worth of shares in HDFC Bank, while foreign portfolio investors held over 37 percent equity stake in the bank.
Experts are upbeat on Jagdishan as well. The say the bank will continue on its growth path and it will reflect in stock price too, as Jagdishan is an insider and well aware of the bank's structure. He has been with HDFC Bank since 1996 and has played an integral role in shaping the bank.
During Puri's tenure, the bank set high standards for processes, built consistent growth and an impressive track-record on asset quality.
"The appointment of Sashi as MD has two benefits (a) He has been with the bank since 1996, joined as manager in finance function, and reached to MD level. So, Sashi is well aware of the HDFC bank process and working style, which will help him to run bank in a smooth manner. (B) The current top management working style will match with him," Jaikishan Parmar, Senior Equity Research Analyst at Angel Broking told Moneycontrol.
Jagdishan's experience, strong balance sheet and excess provisioning coverage will continue to support growth for the bank, he said.
Started in 1994, the bank is now the largest private sector lender with an assets base of over Rs 13 lakh crore. With most lenders exposed to the troubled NBFC and real estate segment, HDFC Bank has managed its assets very well keeping the NPA contained and yet increase its market share.
Vineta Sharma, Head of Research at Narnolia Financial Advisors, feels that there is still enough room for the company to grow.
"The total deposit market share is around Rs 126 lakh crore out of which rural and semi-urban is around Rs 35 lakh crore and the private banks share is mere Rs 5 lakh crore. This leaves enough room for private banks, especially with good pedigree, to improve their market share," she said.
To tap this rural opportunity, the bank is running sustainable livelihood initiatives, wherein it is creating VLE centers with tie-ups with various organisations. The bank will use this network to offer retail products and services to the citizens across the country, she said.
HDFC Bank has a strong liability franchisee, deepening presence in digital banking, has been showing continuous decline in cost to income ratio with a target of 35 percent in three to five years, has return on equity (RoE) greater than 15 percent and has a provision that is higher than regulatory required which provides comfort against any asset quality shock.
For investors, it is very important to understand Jagdishan's thought process, his priorities for the next few years as well as for the long term, Jaikishan Parmar said.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.