Skip to main content

How investors should read Aditya Puri’s surprise stake sale in HDFC Bank

Puri has been the managing director of the bank since September 1994 which makes him the longest serving MD at a private bank. As law requires bankers to retire at 70, his 26-year tenure at the bank will end in October.

The news of Aditya Puri, managing director of HDFC Bank, selling his major stake in the bank grabbed headlines. As per the FY20 annual report of the bank, Puri held around 77.96 lakh shares of HDFC Bank translating to 0.14 percent stake in the bank as at end-March ’20, of which he sold  74.2 lakh shares for around Rs 840 crore. After the reported transaction, Puri’s holding in HDFC Bank stands reduced to 376,000 shares.

Puri has been the managing director (MD) of the bank since September 1994 which makes him the longest-serving MD at a private bank. As the law requires bankers to retire at 70, his 26-year tenure at the bank will end in October.

Senior management of banks selling the stocks granted to them through employee stock option plans (ESOP) isn’t new. As a matter of fact, instances of insiders selling has risen globally following the dazzling rise in stock prices since March. For instance, Morgan Stanley’s CEO sold out 150,000 shares of US bank valued at around $8 million, a day after the bank reported its second-quarter earnings for CY21. There are many such stances. But in the case of HDFC bank, the quantum and the timing of shares sold by Puri surely stirs curiosity.

Though HDFC Bank’s stock is down 3 percent today so far, it is more in line with the banking index. Hence, the weakness in the bank’s stock today doesn’t seem to be the fallout of Puri’s action. Perhaps, the grim outlook revealed by the Reserve Bank of India’s financial stability report could be the reason for weakness in banking stocks. The RBI projects the gross non-performing (GNPA) ratio of the banking sector to increase to 12.5 percent by March 2021 from 8.5 percent in March 2020 under the base case scenario.

Lupin, Granules India recall around 9.71 lakh bottles of diabetes drug in the US market


Why Puri’s exit is a ticklish moment?

Puri has led the most successful and profitable private bank in India. HDFC bank’s market capitalisation was around $200 million, equivalent to Rs 700 crore, on its listing in 1995. As of today, the market cap has zoomed to $83 billion or Rs 595,000 crore, which is around 30 percent compounded annual growth.  That’s a staggering wealth creation over the years.  No doubt, Puri is the highest-paid private bank chief. He received a total remuneration of Rs 18.92 crore in FY20 excluding the value of stock options exercised during the year.


The departure of a successful leader is always a ticklish moment — even more so given that the timing coincides with the pandemic-led economic crisis which will be a litmus test for HDFC Bank and its asset quality.

HDFC’s performance in the latest quarter has been an outlier amidst a dismal scene in the banking sector.

Read Full article - Click Here

Source - Moneycontro.com
Labels:

Comments

Post a Comment

Popular posts from this blog

Panacea Biotech shares hit 5% upper circuit after dengue vaccine completes phase I & II study

DengiAIl induced robust neutralising antibody responses against all the four dengue virus serotypes, the company has said in an exchange filing. Panacea Biotech share price hit 5 percent upper circuit on the BSE on September 24 after the company completed phases I and II study of its dengue vaccine candidate DengiAIl. "Panacea Biotec Ltd. is delighted to announce the successful completion of its Phase I/II study to evaluate the safety and immunogenicity of its vaccine, DengiAll, a single-dose liveattenuated tetravalent vaccine," the company said in an exchange filing. Live-attenuated vaccines contain weakened bacteria or viruses that trigger an immune response but do not cause disease. The company said DengiAIl induced robust neutralising antibody responses against all the four dengue virus serotypes. DengiAIl has been found to be safe and well-tolerated with no serious adverse effects, the company said. After a single-dose, more than 80 percent of the participants ...
Post a Comment
Read more

Check Chemcon Speciality Chemicals IPO allotment status in four simple steps

Equity shares will get credited into the accounts of eligible investors by September 30 and the listing of equity shares will be on October 1, 2020. Chemcon Speciality Chemicals, the manufacturer for pharmaceutical and oilfields industries, is expected to announce the basis of allotment early next week. As per the schedule provided by the company, the finalisation of the basis of the allotment will be done by September 28 and the initiation of refunds or unblocking of funds from ASBA account will take place on September 29. Equity shares will get credited to the accounts of eligible investors by September 30 and the listing will be on October The IPO comprised a fresh issue of Rs 165 crore and an offer for sale of Rs 153 crore by promoters. The company will utilise fresh issue proceeds for expansion of manufacturing facility, working capital requirements, and general corporate purposes. Chemcon manufactures specialised chemicals, such as Hexamethyldisilazane (HMDS) and Chloromethyl Iso...
Post a Comment
Read more

Taking Stock | Profit-booking pulls Nifty below 14,450; Sensex drops 549 points

  All the sectoral indices ended in the red with IT and PSU bank indices falling 2 percent each. The market remained under pressure on January 15 on the back of profit-booking across sectors amid weak global cues. At close, the Sensex was down 549.49 points or 1.11% at 49,034.67, and Nifty was down 161.90 points or 1.11% at 14,433.70. "The market witnessed profit-booking and following global trends. Nifty continues to resist 14,600 and has taken a dip towards 14,360. If the market closes below 14,380 levels, we might see a correction till the levels of 14,180-14,200. Momentum indicators like RSI, MACD are indicating a small correction in the markets," said Ashis Biswas, Head of Research at CapitalVia Global Research. All the sectoral indices ended in the red with IT and PSU bank falling 2 percent each. Broader markets performed in line with the main indices with BSE Midcap and Smallcap indices falling 1 percent each. Tech Mahindra, GAIL, HCL Tech, Wipro and ONGC...
Post a Comment
Read more