ValuePickr Forum

HDFC Bank- we understand your world

Agree with fellow boarders -

  1. Real impact of Covid will only be known in Q3-Q4 mostly
  2. Should look at QoQ numbers, loan book growth less than 1% (sort of expected but can hardly seeing things improving in Q2 with India’s current coronavirus situation), some stress beginning to appear - PAT is lower. YoY much higher because of Corporate Tax Rate difference of 34% vs 25%

Not sure if this vehicle loans issue can be classified as corporate governance issue. Hope it’s not a case of many hidden cockroaches

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I think the statements in the above news report are self contradictory and also vague. It states in the beginning that there was no conflict of interested in later part of of the report it states that there is a Conflict of interest. The bank should have divulged as to what exactly happened in the interest of share holders.

Someone made both notes of the concall and AGM. I don’t think there will be much impact from the recent misconduct and I think that was also cleared in the concall. We could expect only vague reports seeing that everyone holds HDFC bank.



As on 30 June, HDFC Bank’s 9 pc of outstanding loans are under moratorium.

Total outstanding loans are- 10 lakh cr ( aproximately )

So, loans under moratorium would be - 90,000 cr.

Compare this to Bank’s annual profitability run rate of say- 27000 cr.

So…now, one can derive his / her own conclusions.

My take- If the bank’s moratorium book falls below 5 pc over the next 3-5 months, HDFC bank can really come out as a big winner out of this crisis as most PSUs would ( in all probalibity ) practically run out of money to lend ( due much higher bad loans ).

However, if a higher percentage of moratorium book turns bad- shareholders wait could be long.

Disc- not invested.

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Comparing PAT QoQ is better but comparing NIM, advances and deposits YoY isn’t bad since they are not affected by corporate taxes. Please correct me if I am wrong here.
Yes, QoQ performance is not good but if you look at the results, a lot of it is because of “Other Income” which according to results filing is attributed to

The continued slowdown in economic activity has led to a decrease in retail loan
origination, sale of third party products, use of credit and debit cards by customers,
efficiency in collection efforts and waivers of certain fees. As a result, fees/other income
were lower by approximately ₹ 2,000 crore.

I think it has to be expected due to Covid. Considering that there was a lockdown it’s not bad QoQ performance IMHO.

“He (the successor) has been with us for 25 years, my successor was always in place, at least in my mind,” Puri told shareholders at the bank’s virtual AGM held on Saturday. Seeking to assuage concerns on training and business understanding, he also said the candidate has “learnt very well”. However, he did not name the candidate.
Earlier this year, a media report said the bank had selected the names of internal candidates Sashidhar Jagdishan and Kaizad Bharucha, and Citi’s Sunil Garg as the probable candidates.


Morgan Stanley on HDFC Bank

Balance sheet strong, among the best in Indian financials
See strong upside as EPS compounds and valuations normalises to long term averages


Aditya Puri sold almost all of his stake

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He’s retiring in October this year at the age of 70. He is bound to exercise his stock options at some point ofcourse. I don’t think there is much to read in this.


Stock options can be availed and shares can be retained .Does it mean that he is either seeing a better opportunity than this investment or the future does not appear to be bright to support current price or lastly foresees another downside due to pandemic/moratorium losses.
But IMHO it’s significant .

Any views?

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There could be a 1000 probable reasons which there is no point speculating on and diluting the quality of discussion unless there is any evidence that the sale is based on his outlook of near term bank performance.

Anyway, just thinking of it simply - he’s 70, about to retire, and when stock was at all time highs earlier this year his holding was worth 950-1000 crore which crashed all the way to 550 crore in March.

Having recovered 300 crores (read that again…300 crores!) - why wouldn’t anyone want to encash that knowing how volatile markets can be? So I wouldn’t want to read much into this unless there’s evidence of what I said above.


Correct me if I am wrong, but if his options were expiring and he wanted to hold, he would have had to pay the strike price. By selling immediately he can directly get the difference in strike price and market price and this way he doesn’t have to deploy his own cash so seems convenient.

The reason behind almost entire AP stake sell is anybody’s guess unless you are his close friend. Now what we as investors should do.

  1. The stake sale is just a normal routine sale.
    Here stock price would just perform in line with bank performance
  2. The stake sale is due to AP sees some issues.
    There will be sharp massive fall

Now the probability of getting yourself right is same as getting yourself wrong. There is no data which will tilt probability in favor of any outcome.

So this is a completely speculative situation and an individual has to take his own call whether to be in stock or not as per his methodology. If you think you will take decision when we will get clear picture then by that time stock would have done what it was supposed to do.
During Yes bank people used to comment how can such big bank be in problem when RBI closely monitors it. The picture didn’t get clear until stock fell more than 50%. But everyone knows what happened.


It’s likely that post Oct he is going to be involved in something related to BFSI and in that role his holding in hdfc could be seen by some as conflict of interest or maybe he himself wants to start on a clean slate without leaving an iota of doubt in anyone’s mind that there is any conflict of interest.

Just thought of adding another reason as everyone seems to be in that mood :slight_smile:

Personally, this event has zero relevance for me as an investor.

Disc: Invested


It is possible that he may be joining any competing financial institution (in non executive/advisory capacity) and he may not want to have any conflict of interest of having massive shares of his current bank, which may influence his ability to provide guidance to his future company For e.g. what if he decides to join Sachin Bansal’s Navi :thinking: :grimacing:

Please note my thoughts are purely speculative in nature and I am just trying to connect the dots here. …I have no information about Mr. Puri’s future plans…


What you have mentioned may likely to be true. Very possible that the 100% share sale turns out to be a non issue.

However, my only comment will be to please monitor the news and developments a bit more closely than ever. Esp since this is the banking sector and we rely a lot on inegrity of the management in charge.

We are seeing a first change in management as Aditya Puri has been at the helm since beginning. A new management coming in will always entail some kind of shake up / clean ups. As a market darling, continuity of past stellar performance has been baked into the price and if any issues come out in the open publicly in the clean up process, it could quickly snowball into a big issue.

I do not have any basis to say that there is some thing fundamentally wrong at HDFC Bank. But still can’t shake the sense of uneasiness on some points :

  1. Clockwork like 20% growth periodically. It is extremely difficult in India but HDFC Bank breezes through this nonchalantly completely avoiding any landmines when other competing banks have faltered at various times
  2. RBIs foot dragging in case of change in board members as well as on issue of successor (possible they are aware of something and they want to force changes without ringing alarm bells publicly as it is the most visible / biggest private bank in India)
  3. Recent top level exits - Aima (harassment case), head of auto loan (malpractice), CIO (sudden departure) in quick succession close to Aditya Puri’s retirement, just gets one to wonder if people are feeling the heat to clean up things internally before big boss’ departure.

Sorry for the impulsive post, but felt had to state it out explicitly on reading your last sentence. As long term investors, we need to periodically review our investments. In HDFC’s case, now is the time to pay closer attention to ensure all is indeed well with the bank.


I do not have any basis to say that there is some thing fundamentally wrong at HDFC Bank.

This statement of yours was very honest and was also enough to close the discussion :slight_smile:

But nonetheless your state of mind is a reality many people face even I do (in other contexts) and, therefore, it’s important for us to know how to deal with this mindset which brings uneasiness. Not that I am any authority on the subject but am just taking liberty of this being a social media platform to share my experience :slight_smile:

The points you have raised are mere possibilities and since investing isn’t based of possibility of outcomes but probability of outcomes, it’s important we evaluate each possible event in terms of probability.

Here for all the points you have mentioned the probability is very low, solely based on the track record of the bank and the person and it is this track record which if “studied well (not necessarily studied deeply)” will tell you why the two are in a league of their own.

Just bcoz past performance has been extraordinary doesn’t mean it was cooked up. In the context of hdfc operating in the indian banking industry it was like a well-disciplined, intelligent and self-assured person looking at a sumptuous 7-course meal every day but choosing to stick to a disciplined diet even when many around him went on a binging spree. So a 20% or 30% consistent growth could well have been by design maybe because the opportunity was so large that you could decide how much “you want to grow”.

People like Abhay, Munish, etc leaving was pretty candidly addressed by AP during the last call. But yeah, there are many who wud choose to brush it aside as corporate speal!! They were highly experienced, intelligent, hard working people of high integrity (based on my limited knowledge after seeing some of there interviews, presentations and work over many years). They would have also inspired many in their teams to fill their shoes. To link them to any kind of clean up exercise is a low probability event, for me.

Auto loans issue is something which is an isolated bad event and I wud assume it will only make hdfc bk stronger as they take measures to ensure the possibility of such issues happening goes down.

And as much as one can say that the continuity of past performance is baked into the price it is equally debatable that the “best bank ever” has been beaten a little too much to be trading at decadal low valuations and that this opportunity won’t last long!!

A change at the top means clean up, is also just an assumption which becomes weak the more you “know” the bank and the person. Stricter RBI regulations (AQRs, etc) also help making the overall environment more complaint. Still bank’s asset quality hasn’t changed much. Also, if hdfc has been a high quality bank in India and for a long time then probability is also high that it will also have the high quality borrowers thereby reducing the probability of possible clean ups. Quite frankly, for me, clean up happening at hdfc bk post AP is akeen to conspiracy theories we read all the time on web these days :slight_smile: And yet I don’t negate it fully but just put it way below in terms of probability.

RBI dragging its foot on selection: I would assume these are tough times for RBI, very tough. If I was rbi gov I wud even explore the possibility of extending AP’s tenure by maybe a few months allowing RBI to focus on far more important issues at hand. In these times approving top level changes at a bank which has long been the flag bearer of Prudence and Growth in Indian Banking, can’t be taken in haste.

And yes there is always a fear that a great manager is going and so performance could fall but “it is just a fear“ and we need to work on it ourselves if we want to overcome this fear.

Hdfc bk would still tick almost all the boxes for it to be seen as the best bank in India even after he is gone.

So, in the end, there is no denying the fact that Aditya Puri was a great manager. And it isn’t that it doesn’t matter that he is leaving, what matters more is what he is leaving behind!!


First post on the forum. Excuse any formatting etc I have missed.

One can look at how insiders have sold over a give time period.

The 3 charts below

  1. All insiders market sale since 2015
  2. Without Mr Puri’s sale over the years since 2015
  3. Mr Puri’s market sales since 2013

Hypothesis 1: Even the insiders other than Mr Puri are selling - doesn’t look like so
Hypothesis 2: Mr Puri is selling - yes offcourse
Hypothesis 3: Why is he selling - only he can answer that

Having said that my bias is that our family is invested in the bank.