Tag: HDFC

Why Keki Mistry thinks REITs are a good investment option

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ex-HDFC CEO believes Real Estate Investment Trusts (REITs) are very important, particularly for those who may not have the funds to invest directly in real estate because of the high prices.

REITs allow you to invest in real estate assets, such as office buildings, and shopping malls without directly owning them.

In a conversation with CNBC-TV18, Keki Mistry, former CEO of HDFC, said REITs help owners convert illiquid assets into liquid assets.

While there can be various kinds of REITs, he noted, in India, there are REITs only for commercial real estate or for retail or shopping malls etc. and not for residential.

Also Read | GST Council may soon clarify tax exemption to Real Estate Regulatory Authority

Mistry pointed out that REITs are very popular in other countries, especially in the US, where the total value the market is approximately $50 trillion, with listed REITs making up about $1.8-1.9 trillion of that amount.

“In India, on the other hand, there are only four listed REITs. In the US there are close to 200 listed REITs, just under 200. So, there is a huge difference between India and the US. The total market cap of all the listed mcap in India is about $4 trillion, roughly, whereas the market cap of all the listed REITs is under $10 billion,” he added.

Also Read | Arvind SmartSpaces eyes 35% revenue growth in FY24, targets Surat real estate

He expects an increase in the market capitalisation of REITs in India as more developers, who have developed large amounts of commercial real estate that is leased out, will eventually want to convert them into REIT structures.

Besides the US, REITs are also popular in the United Kingdom (UK), Japan, and Singapore.

Mistry is optimistic about the Indian real estate sector.

“I believe the growth opportunity in India is phenomenal. We are a very under-penetrated market, mortgages in India are only 11% of the GDP. In the Western world mortgages are 50-60-70% of GDP. China is about 24-25%. India is only 11%. So, there is so much scope to grow,” he added.

For the entire interview, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bandhan Bank designates Santosh Nair as Head of Consumer Lending and Mortgages

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bandhan Bank appointed former CEO of HDFC Sales, Santosh Nair, as the Head of Consumer Lending and Mortgages on Thursday, February 1.

Bandhan Bank’s Shantanu Sengupta will step down from the post of Head, Retail Banking, the bank announced. However, he will assist the bank in a smooth transition and will leave the organisation in early FY2024–25 to pursue opportunities outside the bank.

Chandra Shekhar Ghosh, MD and CEO of Bandhan Bank, expects Nair to be a key contributor to the company’s agenda of strengthening the secured book and diversifying the asset book of the private sector bank.

Ghosh said, “Santosh is a highly experienced professional with expertise in mortgage and retail lending. The bank has been focused on strengthening its secured book and diversifying its asset book, and Santosh, with his varied and proven experience, will be a key contributor to this agenda. On behalf of everyone at Bandhan Bank, I welcome Santosh.”

Earlier, Santosh Nair was the CEO of HDFC Sales and also worked at HDFC and HDFC Bank in his three decades of experience in the industry.

In the Kolkata-based bank’s Q3 FY2024 results released on first week of January 2024, Bandhan Bank witnessed an 18.6% year-on-year (YoY) and 7.7% quarter-on-quarter (QoQ) rise in its loan portfolio for the third quarter of FY24. This figure includes on-book, off-book, targeted longer-term refinancing operations (TLTRO), and pass-through certificate (PTC) components, with a reduction in non-performing asset (NPA) portfolio after a sale to an asset reconstruction company (ARC) amounting to ₹720 crore.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI approves HDFC Bank’s product on offline retail payments for adoption

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) on Monday said it has approved an ‘Offline Retail Payments’ product developed by HDFC Bank, in partnership with Crunchfish AB, for adoption by banks and other financial institutions.

Under the ‘On Tap’ application facility for the theme ‘Retail Payments’ of the Regulatory Sandbox (RS), HDFC Bank (in partnership with Crunchfish AB) was selected for the Test Phase, as per a statement.

The RBI, in the statement, said the product “may be considered for adoption by regulated entities, subject to compliance with applicable regulatory requirements.”

The product ‘Offline Retail Payments’ provides capability for customer and merchants to be able to transact in offline mode, it said. “It is implemented as a trusted application that uses certified virtual secure element as well as Public Key Infrastructure,” the RBI said, providing details about the product.

The solution aims to boost adoption of digital payments in areas of no or low network by enabling transactions without the need to have a network connection.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

HDFC Bank Q2 Results: Net profit up at ₹15,976 crore in first quarterly earnings after merger

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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HDFC Bank on Monday, October 16, reported a 9.3% rise in net profit at ₹15,976 crore for quarter ending September 2023 compared to CNBC-TV18’s poll of ₹14,616.5 crore. However, it is important to note that these numbers are not directly comparable on a quarter-on-quarter (QoQ) or year-on-year (YoY) basis due to the lender’s merger with Housing Development Finance Corporation (HDFC) on July 1, 2023.

The bank’s net interest income (NII) for the quarter stood at ₹27,385 crore, slightly below CNBC-TV18’s projected NII of ₹28,187.4 crore.

HDFC Bank also disclosed key asset quality metrics, including gross non-performing assets (NPAs) at ₹31,578 crore, representing 1.34% of gross advances, and net NPA at ₹8,073 crore, accounting for 0.35% of net advances. Additionally, the bank set aside provisions totaling ₹2,904 crore.

HDFC Bank’s return on assets (RoA) was reported at 1%, annualised at 2% for the first half of FY24. The net interest margin was at 3.4%, while the core net interest margin stood at 3.65%. The bank’s pre-provision operating profit reached Rs 22,694 crore. The gross advances stood at 23.54 lakh crore.

Commenting on the numbers, Srinivasan Vaidyanathan, Chief Financial Officer at HDFC Bank, highlighted a significant milestone, stating that HDFC Bank’s total customer base now stands at a remarkable 9.1 crore post-merger. He further revealed that HDFC Bank had added over 16,000 employees in the recent quarter.

Vaidyanathan disclosed that the bank’s total deposits have reached a substantial ₹21.7 lakh crore and pointed out that advances have reached ₹23.5 lakh crore, with a sequential addition of ₹1.1 lakh crore in Q2. He, however, acknowledged the impact on net interest margins (NIMs) and attributed the change to the merger. He explained that HDFC Bank’s NIMs before the merger were at a higher 4.1%. The merger led to a liquidity build-up, which had a 25-30 basis point impact on NIMs.

Notably, Vaidyanathan revealed that approximately 22 basis points of the 1.34% of gross NPAs are currently classified as NPAs due to restructuring, despite their positive performance.

Ashutosh Mishra, Head Of Research, Institutional Equities At Ashika Stock Broking, lauded HDFC Bank’s performance on the bottomline, but expressed some concern regarding the NIM.

Mishra also highlighted the bank’s asset quality, stating, “There is no negative surprise on the asset quality front.” He pointed out a positive surprise regarding the return on assets (RoA), stating, “quarterly RoA is at 0.50%, which is annualised at 2% levels, whereas the market was anticipating roughly 1.8-1.9%.” He further emphasised, “So if they are able to sustain RoA at the 2% level, then the underperformance of the bank will come down going forward.”

Prakash Diwan, a market expert, observed that HDFC Bank’s financial numbers were in line with the market’s expectations. He, however, highlighted that the bank had previously cautioned about a slower pace in the performance of the merged entity.

He stated, “Five weeks back, they had cautioned everybody about a little bit of a slow offtake in terms of the merged entity getting back to its optimal level of performance, and that is exactly what is reflecting in NIMs.” Diwan concluded by stating, “So I won’t read too much disappointment in these numbers.”

The shares of HDFC Bank settled 0.47% lower at ₹1,529.50 at the BSE.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

HDFC Bank to report first quarterly results after merger, Street expects 3% fall in net profit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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HDFC Bank is scheduled to unveil its results for the second quarter (Q2) of financial year 2023-24 on Monday, October 16. This announcement follows the merger of HDFC Bank with Housing Development Finance Corporation (HDFC), a transformational union that became effective on July 1, 2023.  According to a CNBC-TV18 poll, HDFC Bank will report a 9.8% increase in Net Interest Income (NII), reaching an estimated Rs 28,187.4 crore.

However, profit figures are anticipated to reveal a 3% year-on-year decline, potentially dipping to Rs 14,616.5 crore. In the corresponding quarter of FY23, HDFC Bank had posted a net profit of Rs 15,060 crore, with NII at Rs 25,660.4 crore.

According to brokerage firm Emkay Global, the private lender is expected to be hurt by the sharp margin contraction after the merger. “The second quarter could be a bottoming out quarter and should be a key beneficiary of margin recovery from the third quarter, which coupled with reasonable valuations among peers should drive up the stock,” it said.

Here are key things to watch out for:

Post-merger unveiling

Industry experts and investors are closely eyeing HDFC Bank’s performance, as it marks the debut quarterly financial disclosure for the lender since the merger. Analysts anticipate a fair degree of volatility in the numbers.

Cost of funds

Investors will scrutinise the opening cost of funds, a pivotal metric for the merged entity, as it reflects the bank’s ability to acquire low-cost funding, which is vital in maintaining healthy profitability.

Yield on loans

The yield on loans, especially in the context of the merged entity, will be closely examined. This metric provides insights into the bank’s ability to generate income from its lending activities.

Impact of ICRR

The Internal Capital Adequacy Assessment Process (ICAAP) is expected to have significant implications for the Net Interest Margin (NIM) profile of the merged entity.

A look at HDFC Bank’s shares

One of the worst-performing banking stocks so far in 2023, HDFC Bank is nearly 5% year-to-date. The banking scrip has corrected 6% in the last three months alone.

At the time of writing this report, HDFC Bank’s shares were trading 0.63% down at Rs 1,527.05 apiece on the BSE.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

HDFC Bank announces key management portfolio rejig after merger; second under CEO Sashi Jagdishan

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s top private lender HDFC Bank has announced a strategic re-organisation, rejigging the portfolios of its top management after the mega merger with its parent HDFC Limited was completed in July. This is the second such re-organisation under Sashidhar Jagdishan, who took over as the MD & CEO of the bank after Aditya Puri in October 2020.

Stating the rationale for the revised structure, Sashi Jagdishan, MD & CEO, HDFC Bank, said, “The runway for our growth is large. This change is being done to bring in a very sharp focus on leveraging what we have built and for enhanced execution. I am sure with focused efforts and the wholehearted resolve of the organisation, we will deliver. My best wishes to all of them in their new roles.”

The reorganisation was in the works since the merger was announced, according to people in the know, and was required to adequately split responsibilities for driving the bank’s growth as it became more than three times its size in terms of advances and net worth after the merger with HDFC Limited. “Some of the re-organisational changes are also to ensure that those who have been with us for a long time are given a recognition, and will have a supervisory role as their teams drive the growth of certain businesses,” said one of the people who did not wish to be quoted.

The biggest change, perhaps, comes in the form of the retail branch banking business being split into two, and a mortgages business getting a dedicated Group Head.

Key Changes

HDFC Bank, in a response to CNBC-TV18’s query on the rejig, said that Ashish Parthasarathy, who has led treasury for the bank since 2009, will now get the additional responsibility for the retail branch business, which handles deposits and product distribution. Under Parthasarathy, the retail branch business will be split into two geographical regions, and be headed by separate people.

“Smita Bhagat, Group Head and Sampath Kumar, Group Head will be the two new Retail Branch Banking Heads. They will continue to push the agenda of creating a great service culture and an obsession to delight our customers while delivering the business momentum that is needed. Smita Bhagat will lead branch banking for North, Central and East regions. Sampath Kumar will lead branch banking for West and South regions,” HDFC Bank said. Both Bhagat and Kumar will report into Parthasarathy.

The move is significant as HDFC Bank already has the largest branch network among India’s private banks, at over 8,000 post merger. Over the next 3-5 years, the bank aims to double its footprint by opening 1,500-2,000 branches every year, its CEO Sashidhar Jagdishan has stated.

The large mortgage book, which HDFC Bank acquired from its parent, will now be headed by Arvind Kapil, who previously headed Retail Assets of the bank. In his new avatar, Arvind Kapil will now spearhead the Mortgage business, including Home Loan, Loans Against Property, and HDFC Sales. After the merger, the share of mortgage in HDFC Bank’s loan book stood at a massive 35 percent.

Arvind Vohra, who previously headed retail branch banking, will now move as Group Head of Retail Assets (excluding Mortgages and SLI). Vohra helped spearhead “the biggest retail expansion over the last many years,” HDFC Bank said, and shall now focus on further increasing the retail assets penetration. Both Arvind Kapil and Arvind Vohra will continue to report to the MD & CEO Sashi Jagdishan.

Ashima Bhat, who was the Group Head – Business Finance and Strategy, CSR and ESG, Administration, and Infrastructure at HDFC Bank- will now move into her new role responsible for Tele Sales/ Relationship Channel. Her key task would be to create a Bank within a Bank, the lender said, and further enhance the bank’s ability to provide relationship management services to the increasing base of its customer franchise. She will continue to lead the Infrastructure function, and will be reporting into Ashish Parthasarathy.

‘Bank within a Bank’ would serve as a virtual relationship channel to service customers who do not necessarily need a physical touch point, explained a person in the know. This would help the bank to continue expanding its customer base significantly without necessarily expanding physically. While the bank would be expanding its branches simultaneously, this ‘bank within a bank’ would help drive growth and meet its stated objective of creating a “new HDFC Bank every four years,” explained this person who did not wish to be quoted.

As Parthasarathy expands his focus onto retail branch banking, the bank has named Arup Rakshit as Group Head for the Treasury function. He will continue to report into Ashish Parthasarathy.

In keeping with the bank’s stated focus of transforming itself digitally, it also announced that Ramesh Lakshminarayanan, CIO would lead the entire IT and Digital function of the Bank to unify all the technology and digital developments and to create a more holistic core and customer experience layer. The IT organisation of erstwhile HDFC Limited will be fully integrated with the overall IT & Digital structure. Lakshminarayanan will report into the MD & CEO in his new role.

Other Changes

Besides these, the bank also made other changes to the top management portfolios as it realigns itself to its new merged avatar.

Kaizad Bharucha, Deputy Managing Director, in addition to managing Wholesale Banking, will now also manage Inclusive Banking Initiatives Group, CSR, and ESG. Kaizad has also been designated director for asset liability management (ALM), Oversight & Monitoring Internal Ombudsman.

Parag Rao, Group Head, will now be additionally responsible for Marketing, Liability Product Group, Third Party Products, Non Resident Products in addition to Payments (Cards, Merchant Services), and Consumer Finance.

Payzapp, Vyaapar, Smartbuy and other consumer facing digital products would be run as Direct to Consumer Digital Businesses with their own separate P&L and would be headed by Ravi Santhanam. Ravi will continue to spearhead the digital sales of retail products as the Chief Marketing Officer He will report to Parag.

Anjani Rathor, Group Head would now lead the Digital Customer Experience as Chief Digital Experience Officer of the Bank. Anjani will focus on customer’s collective experience of interacting with various touchpoints of the Bank including all online banking systems, virtual channels, branches, and alternate banking outlets. He will set up a unified Data competency for the Bank for improving customer engagement and cross sell. He will continue to report to Parag.

Rakesh Singh, Group Head would spearhead the creation of Banking as a Service (BaaS) concept. “The BaaS channel is expected to become as big as the traditional channels in the years to come,” HDFC Bank said. Singh will also be responsible for Offshore International Banking, in addition to Investment Banking, Private Banking, and Thematic Research, and will continue to report into the MD & CEO.

Sumant Rampal will now be responsible for Sustainable Livelihood Initiative (SLI) business in addition to Business Banking Working Capital, and Rural Banking Group, and will continue to report into Rahul Shyam Shukla.

Additionally Rakesh Kumar Rajput takes over as the Chief Compliance Officer of the Bank with effect from October 1, 2023 in place of Arun Mohanty, who retired on September 30, 2023.

The rest of the function heads and business heads continue in their respective roles, HDFC Bank said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

HDFC Bank revamps top management after mega merger

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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HDFC Bank is revamping some parts of top management as the Indian bank seeks to propel its mortgages business, three months after it acquired another lender. The bank detailed the changes in a memo to employees late Sunday, according to people familiar with the matter, who asked not to be identified discussing private information.

It has brought information technology and digital functions, led by Ramesh Lakshminarayanan directly under Chief Executive Officer Sashidhar Jagdishan as the bank leans on technology to offer more products and services across its branches, the people said.

Ashish Parthasarthy a bank veteran who has led treasury since 2009, will get responsibility for the key retail branch business, which handles deposits and product distribution, they added.

The lender’s shares have come under pressure since the takeover of Housing Development Finance Corporation in July, which made HDFC one of the world’s largest banks. It also faced a rare downgrade last month from Nomura Holdings Inc, which cited concerns on HDFC’s return on assets and pressures on loan growth.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Brokerages slash HDFC Bank’s price target to as low as Rs 1,800

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage houses have kept target price in between Rs 1,800-Rs 2,300 on HDFC Bank a day after the lender re-appointed Sashidhar Jagdishan as the Managing Director and Chief Executive Officer of the bank. The lender’s shares on Wednesday, September 20, declined nearly 4 percent in early trade on the Bombay Stock Exchange (BSE).

The brokerage firms have weighed in on the lender’s recent developments and mergers, offering both positive and cautionary insights.

Here’s what key brokerage houses said on HDFC Bank:

Nomura

Brokerage firm Nomura has downgraded HDFC Bank’s rating to neutral from its earlier rating of buy. It has cut the price target to Rs 1,800 from Rs 1,970 earlier.

It has cited four negative surprises after the mega HDFC Bank-HDFC merger behind its downgrade.

(1) Net worth adjustments have a negative 4 percent impact on FY24F BVPS (book value per share).

(2) Net interest margin (NIM) cuts of about 25 bps in FY24F and 15-20 bps in FY25-26F on excess liquidity, and accounting adjustments.

(3) Higher cost-to-income due to accounting changes (upfronting of sourcing costs under IGAAP for HDFC versus amortisation under IndAS).

(4) A sharp uptick in non-performing assets (NPA) in HDFC’s corporate loan book.

Bernstein

Bernstein has kept the target price at Rs 2,300 for the lender. The brokerage’s analysis of HDFC Bank further reveals that the addition of excess liquidity is pushing ‘normal’ Return on Assets (RoAs) to FY25.

“However, one-off factors have resulted in an unchanged book value per share. The forecasted normal RoA of the merged entity remains at 1.9-2.0 percent. Nevertheless, there is a slight concern about a marginal worsening of headline asset quality metrics,” it said.

The anticipation of depressed earnings in the next few quarters, due to these one-off factors, has suggested that the normalisation of RoA and subsequent re-rating may take a few quarters longer than initially expected, the brokerage said.

Macquarie

The brokerage has kept the target price at Rs 2,110 while presenting a mixed perspective. It has acknowledged some negative surprises in the merged numbers, highlighting a one-time impact on net worth amounting to 5 percent, though this is attributed to timing differences.

There’s a possibility of missing the near-term 1.9-2.1 percent merged Return on Assets (ROA) guidance. However, hopes are pinned on potential gains from Credila, the education loan unit, the firm said.

CITI

CITI has cut the target price to Rs 2,110 while expressing surprise at e-HDFC’s non-individual non-performing assets (NPAs) rising from 3.7 percent in March 2023 to 6.7 percent in June 2023. Additionally, it has noted a Specific Provision Coverage Ratio (PCR) exceeding 70 percent on HDFC’s NPA, along with a 0.7 percent contingent provision on the overall portfolio.

“There’s a significant rebasing of Net Interest Margins (NIMs) to 2.9 percent for FY23, coupled with further reductions on merger day. These factors have a notable impact on e-HDFC’s March 2023 Ind-AS net worth,” the firm said.

UBS

The brokerage has kept the target price at Rs 1,900, while emphasising the need for clarity on the merged balance sheet and points out a slightly weaker Book Value per Share (BVPS). Accounting and provision adjustments are seen to have reduced net worth accretion, with the creation of a Deferred Tax Liability (DTL) reserve expected to impact capital ratios. The first-quarter Net Interest Margins (NIMs) are anticipated to be influenced by the Indian Corporate Rupee Reserve (ICRR) and excess liquidity, UBS said.

Jefferies

The brokerage has kept the target price at Rs 2,030. It recently hosted an analyst meeting to clarify the transition impact of the merger with HDFC. It has anticipated a slightly higher impact on NIMs due to increased liquidity and ICRR. Reports also suggest that the non-performing loans of HDFC Ltd are currently higher. Despite a 5 percent net worth impact, most of it is categorised as non-cash and transitional, and retail deposit mobilisation remains stable, it said.

Morgan Stanley 

The firm has kept the target price at Rs 2,110. It highlighted lower Book Value per Share (BVPS) and earnings estimates for HDFC Bank. This adjustment is attributed to one-time net worth/PnL adjustments as HDFC transitions from IND-AS to Indian GAAP accounting.

Additionally, lower net interest margins (NIMs) are expected, largely due to the influence of I-CRR/excess liquidity and heightened competitive intensity, the firm said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Someone once asked Deepak Parekh, ‘what do you know about banking?’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Three months after his retirement, 78-year-old Deepak Parekh, the former Chairman of HDFC, opened up about his 46-year-long journey building India’s first mortgage lender, which went on to become a financial services empire like no other over the next four decades.

“Rs. 30,000,” was Parekh’s response when Janmejaya Sinha, Chairman-India of BCG asked him about the size of the first loan that his company made after its founding in 1977. HDFC went on to become the country’s biggest private mortgage lender that has financed over 9 million homes since its inception. On July 1, 2023, HDFC merged with its sister concern, HDFC Bank (born in 1994), creating the country’s biggest private bank with nearly 7,895 branches.

However, his first proposal to set up a bank was rejected by the board of directors at HDFC. “The board members felt it was too risky. ‘What do you guys know about banking?’ You are exposing our company to that. We are doing very well. Why do you want to venture out? We had to really prepare our opposition paper and go back to the board and finally, they agreed that we could only put 25 percent, not 50 percent. That was the history, why we only had 25 percent of our bank because our board did not allow us to put more,” Parekh reminisced.

HDFC Bank’s net worth at inception, less than two decades after HDFC was born, was Rs 300 crore. There are different estimates on the street for the combined entity of HDFC and HDFC Bank, post-merger, but most of them see the bank to be worth over Rs 4 lakh crore by March 2024. Net worth is the difference between its assets and liabilities.

Read Here | Stepping down as HDFC chairman was career’s most difficult decision, says Deepak Parekh

High finance was not as hot in the 1970s and 1980s India, as it is today.

Despite being the first mover in home loans, Unit Trust of India, the only mutual fund in India in 1988, refused to invest in HDFC. “His (Parekh’s) request was turned down on the grounds that retail lending was too risky a business,” Saurabh Mukherjea, the founder of the Mumbai-based Marcellus Wealth Management, wrote, along with Tej Shah, 2020.

But by the same account, that of Mukherjea, by the late 1980s, HDFC had raised money from the International Finance Corporation (IFC), the World Bank and the United States Agency for International Development (USAID).

“We used to go twice a year all around to meet investors which is not happening today in the corporate sector. If you want foreign investors, if you want institutional investors, or foreign sovereign funds, you must meet them 3-4 times before they get comfort in the management. You have to do that after your 6 monthly results, after your annual results, you have to go all over the world and it is quite cumbersome. One day here, one day here it is not easy to do. We followed it up because we had no promoters, 100 percent stock was in the market. We had to find buyers of the stock,” Parekh said

Parekh —  a 33-year-old chartered accountant in 1978 who had done his articleship in London —  was offered a basic salary of Rs 3,500 and another Rs 500 as a dearness allowance when he joined HDFC, the company founded by his uncle HT Parekh. “Salaries were very low and however, we were lucky to get a good team, and we worked well together and it was a new idea,” he said, reflecting on how the financial sector had changed in the decades since.

“And the reason people did not leave us is from the early days we gave stock options to each and every employee of ours,” he added. However, ESOPs are not an option for HDFC Bank now. “Even in the last stock option we gave some five, seven years ago, it was to each and every employee. Now we could do that because we had 3,000-3,500 people. But banks have three lakhs numbers. So you can’t do it in a large organisation, we could get away because we were a small outfit,” according to Parekh.

Also Read | Salaries were very low but first 10 years of survival made me believe in HDFC: Deepak Parekh

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stepping down as HDFC chairman was career’s most difficult decision, says Deepak Parekh

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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For a man who quit his stable job at Chase Bank to join his uncle’s housing loan startup, HDFC, in 1978, one would think the most difficult phase of his career would have been this transition. But not so.

Parekh, the now non-executive chairman of the private bank, says that the bitterest pill to swallow was his stepping down as the head of HDFC at 65 to give fresh talent a chance to grow.

“The most difficult decision I had to take was when I was 65 years old,” Parekh said in response to a question at the Global Fintech Fest 2023. “I was the executive chairman, and I thought that my board wanted me to continue. I thought if I continued, it would come in the way of the next lot of people.”

In a world often influenced by external pressures, Parekh’s decision to step down was entirely self-initiated. “There was no RBI directive, no regulatory reason, no pressure from the board,” he noted, adding that there was no pressure either for him to continue. “But I thought, ‘No, at 65, you have to step down and become non-executive.'”

Where seasoned leaders often find it challenging to relinquish their positions, Parekh’s internal struggle highlights the delicate balance between personal aspirations and the greater good of an organisation. Parekh added, “So I decided, after a lot of (introspection), and much against my family’s wishes, that it was not fair for me to continue. And I retired in my 65th year and became the non-executive chairman of HDFC.”

Parekh’s humility and dedication to the institution he had nurtured for decades shone through as he revealed that, for the last 13 years, he had not received any salary. “As a non-executive chairman, you are not entitled to any stock options,” he explained. “So my colleagues who have been working with me for 20-30 years had more options than I did.”

This revelation underscores Parekh’s commitment to the principle of equitable leadership succession. He said, “It was a difficult decision. It was a fair decision because you had to let others come up in life. And I took the call, and I don’t regret it at all. I was available to them then. I’m still there. And I think it was necessary.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow