MUMBAI: Shares of HDFC Bank fell 2% on Thursday, with analysts citing uncertainty over the appointment of its next CEO. The bank also faces legal action in the US over alleged violations of securities laws for not disclosing adverse information related to a bulk deposits case.HDFC Bank CEO Sashidhar Jagdishan’s tenure is set to expire on Oct 26. “There are just 2 months left and there is still no clarity about his extension/renewal. Markets have been worried about succession issues at HDFC Bank for some time now, as a result of which the stock has been weak,” said Suresh Ganapathy, an analyst with Macquarie.The appointment process requires the nomination and remuneration committee of the bank’s board to decide on candidates and recommend them to the board. RBI requires banks to send recommendations well before the CEO’s tenure ends.“In our opinion, there are two main options now, considering the paucity of time. Either the MD & CEO gets a tenure extension of say around 6 months or a full 3-year tenure. In case of the former, we believe, the messaging here is that the board is looking for candidates apart from the current CEO and wants time from RBI to recommend a new list. In case of latter, the uncertainty ends with respect to the CEO tenure,” Ganapathy said. He added that the stock could fall further if Jagdishan receives a short-term extension.Separately, the bank faces a federal securities class action lawsuit in New York. An investor’s complaint names the bank, its CEO and chief financial officer as defendants. The litigation follows a fall in the bank’s share price after allegations that HDFC Bank incentivised Maharashtra State Road Development Corporation with payments to attract bulk deposits. While the transaction may not have resulted in undue gains for individuals, RBI bars incentives for placing deposits.
