HDFC Bank slips to 2-1/2-year low as legal, leadership woes linger
Shares of HDFC Bank, India’s top private lender, fell for a third straight session on Thursday, dragging the country’s benchmark stock index amid concerns over legal, regulatory and leadership challenges. The lender’s shares slipped as much as 2.37% to their lowest in two and a half years, losing $2.6 billion in market value at close of trade. The shares, down more than a quarter this year, are…
HDFC Bank, India's leading private lender, has witnessed a decline in its shares, falling to a two and a half year low amid ongoing legal, regulatory, and leadership issues. This decline has resulted in a loss of $2.6 billion in market value. The bank, being the largest by weightage on India's benchmark Nifty 50 index, has seen the country's benchmark stock index also dip. This year, the index has taken a 7.8% hit.
HDFC Bank is currently facing potential legal action in the U.S., including a class-action lawsuit over alleged illegal payments, amounting to 450 million rupees ($4.7 million). The lawsuit was filed by several law firms against the bank and its two executives. The potential lawsuit is adding to the woes, making investors cautious despite the stock's appealing valuations.
Aishvarya Dadheech, founder and chief investment officer at Fident Asset Management, noted that the lawsuit has emerged as a near-term overhang, negatively impacting sentiment. The bank vehemently denies the allegations, stating it will defend itself vigorously. Additionally, there are reports of clients of Carlisle’s Luxembourg Life Fund, purchased through HDFC Bank's Dubai operations, planning legal action against the bank for alleged mis-selling, losses, and delayed redemptions.
The bank's shares had also plummeted in March following the abrupt resignation of its part-time chairperson, citing ethical differences with management. The uncertainty over the tenure of the current CEO, Sashidhar Jagdishan, who is set to step down on October 26, continues to loom over the stock. There are conflicting views on the CEO's reappointment.
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