HDFC Bank stock rating - 'buy'; brokerages eye up to 55% upside, see no governance concerns post chairman exit

HDFC Bank

• Brokerages maintain bullish ratings on HDFC Bank despite selloff
• Jefferies and Motilal Oswal see up to 55 percent upside potential
• Keki Mistry named interim chairman, easing governance worries

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Brokerages have retained their bullish ratings on HDFC Bank stock with the share price targets implying up to 55 percent upside, despite yesterday’s sharp selloff triggered by the resignation of part-time chairman Atanu Chakraborty. Jefferies and Motilal Oswal Financial Services have flagged significant upside from current levels.

Shares of HDFC Bank fell 5.1 percent on Thursday to close at Rs 800, after plunging as much as 8.7 percent intraday -- their steepest fall in over two years -- amid concerns around governance following Chakraborty’s exit citing “values and ethics”.

HDFC Bank stock call: Brokerages say 'buy'; check target prices

However, global brokerage Jefferies maintained its ‘buy’ rating on HDFC Bank stock with a share price target of Rs 1,240, implying an upside of about 55 percent from the previous close. Jefferies said the management and board interaction following the resignation indicated that while “minor issues” may exist, corporate governance at the bank is “not compromised”. The brokerage also highlighted that the appointment of Keki Mistry as interim chairman for three months provides continuity and should help ease investor concerns.

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It added that Chakraborty’s clarification of “no wrongdoing” and the Reserve Bank of India’s statement that there are no material governance concerns are “comforting” for the stock’s outlook.

Domestic brokerage Motilal Oswal Financial Services also reiterated its ‘buy’ rating on the stock with a target price of Rs 1,100, implying a potential upside of 38 percent. The brokerage said that both the bank and the regulator have clearly stated that there were no governance, operational or regulatory issues flagged prior to the resignation. The RBI has also endorsed the bank’s governance record, stating there are “no material concerns on record”.

HDFC Bank investors eye clarity on chairman appointment, CEO succession

Motilal Oswal said the swift appointment of Mistry as interim chairman, along with close engagement between the board and the regulator, reflects stability in leadership and oversight. The brokerage added that Mistry’s own remarks -- that he would not have accepted the role unless the institution’s systems and ethical framework aligned with his principles -- reinforce confidence in governance standards.

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While the regulatory reassurance and management commentary have helped assuage concerns, Motilal Oswal said it expects clarity on the appointment of a permanent chairman, along with the upcoming CEO succession process, to be key triggers for restoring investor confidence.

HDFC Bank stock has underperformed, declining 9.5 percent over the past year compared with a 0.8 percent fall in the Nifty 50, even as the bank continues to operate with strong capitalisation, liquidity and business momentum.

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