HDFC Bank Ltd., India’s most valuable lender with a market capitalisation of $115 billion, has fast-tracked the search for a chief executive officer after incumbent Sashidhar Jagdishan decided not to seek an extension.
The lender plans to hire an executive search firm as early as this week to begin looking for his successor, according to people familiar with the matter. Hiring a new head quickly is crucial as the bank seeks to move past growing uncertainty since its part-time chairman had an acrimonious exit in March. The new CEO will have to assure investors the bank’s governance systems are robust, as well as boost business at a time when its shares have lagged those of peers.
HDFC is one of India’s systemically important banks, commanding nearly 12% of the total deposit base as on 30 June. The race for the CEO job would pit several veterans within the lender against outsiders who could get a chance to lead India’s largest private sector bank.
Sashidhar Jagdishan decided not to seek reappointment to allow for a smoother transition and to avoid the risks of a shortened term imposed by RBI regulations.
The search is urgent due to the impending end of Jagdishan's tenure and the need to stabilize investor confidence amid growing uncertainty around the bank’s governance and performance.
Kaizad Bharucha's candidacy could be affected by RBI regulations limiting the tenure of whole-time directors to 15 years, which may prevent him from serving a full three-year CEO term.
An external candidate may face cultural and integration challenges within the bank, potentially disrupting continuity and strategic execution.
Investors may be concerned as HDFC Bank's share price has experienced significant declines, reflecting broader uncertainties about the bank’s leadership and governance.
While an internal candidate could ensure smoother continuity, appointment of an external candidate would throw up cultural and integration challenges, Vishal Narnolia, analyst ICICI Direct, wrote in a note.
Kaizad Bharucha: Bharucha, 61, is the deputy managing director of the bank and a three-decade veteran at the lender. He is in charge of retail and wholesale banking at the firm, besides other functions, and is viewed as a frontrunner among brokerage houses to take over as CEO, given his experience.
However, there is a regulatory niggle that might come into play. Since Bharucha has served as a whole-time director since 2014, and central bank regulations cap the continuous tenure of a CEO or whole-time director at 15 years, he might not be able to complete a full three-year term.
“While Bharucha’s institutional knowledge and execution credentials could provide valuable continuity, a short tenure would risk deferring rather than resolving the succession question,” Macquarie Group Ltd. analysts, including Suresh Ganapathy, wrote in a note.
V. Srinivasa Rangan: Rangan, 66, is the executive director at the bank and heads functions like human resources, investment banking, legal, information security, ethics, fraud and vigilance.
But Rangan’s appointment would hit the RBI’s 70-year age-limiting factor around 2030, and thus would be eligible for only a single term, brokerage IIFL Capital wrote in a note. Between Rangan and Bharucha, IIFL Capital’s Senior VP Rikin Shah said, the latter could be relatively better placed given he has more experience in running various businesses at the bank.
Jimmy Tata: The chief credit officer of the bank is also among the internal candidates to be potentially picked for the role, according to a report by NDTV Profit. A veteran of more than three decades at the lender with experience across corporate banking, risk and credit, Jimmy Tata’s long institutional tenure gives him a deep understanding of the bank.
