HDFC Bank’s bonds fall to record low after CEO’s shock exit

Newly issued dollar bonds by HDFC Bank Ltd., India’s most valuable lender, slid to record lows on Tuesday as Chief Executive Officer Sashidhar Jagdishan’s unexpected decision to step down continued to weigh on investor sentiment.

Notes of the Mumbai-based lender fell for a fifth straight session as the lender confronts a slew of issues that have placed its governance practices under intense scrutiny recently. Shares of HDFC, which has a market capitalization of $116 billion, have also underperformed the broader Indian market.

HDFC’s dollar bond maturing in June 2031 dropped as much as 0.13 cents on the dollar on Tuesday to 98.504 cents, the lowest level since its issuance in June, according to Bloomberg-compiled data. Its US currency notes due in August 2029 and August 2031, issued last week, also declined to their weakest levels.

The lender accounts for nearly 12% of India’s total deposit base as on June 30. His move, announced Saturday, ended months of speculation that Jagdishan, who took the helm in 2020, was eyeing an extension.

Shares of HDFC Bank fell as much as 1.5% in Mumbai trading earlier, before paring losses. They have lost about 28% this year, against a 3.3% decline in the Nifty Bank Index.

Jagdishan’s decision not to seek reappointment “introduces a degree of leadership transition risk as the succession was not previously anticipated,” said Devang Rajkotia, assistant vice president at Moody’s Ratings. “An orderly succession process and continuity in strategy execution will be key to sustaining stakeholder confidence and limiting any negative credit implications.”

The lender is in talks to hire an executive search firm to fast-track the appointment of a new CEO, Bloomberg reported on Monday, citing people familiar with the plan.

“Jagdishan’s decision to step down introduces leadership uncertainty that could weigh on HDFC Bank’s bonds in the near term,” said Rena Kwok, senior credit analyst at Bloomberg Intelligence, adding the lender’s fundamental creditworthiness remains intact and continues to underpin its debt.