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Hoarding up cash

HDFC Bank’s treasurer Ashish Parthasarathy sells shares worth Rs.247 million as the stock rallies after its Q2FY21 results

Every hero has a bad day. For HDFC Bank, that day was March 24, when the stock hit a 52-week low of Rs.739. But, the private lender registered strong growth and revival in fees in the September quarter, bouncing back from the dismal show in Q1FY21. In Q2, the bank’s net profit came in at Rs.75.13 billion, recording 12.8% growth from Rs.66.58 billion posted in the June quarter. Asset quality, too, improved marginally as gross NPA stood at 1.08% in Q2FY21 against 1.36% in Q1FY21.

Post the results, the stock rallied till Rs.1,250. This run-up was cashed in by treasurer Ashish Parthasarthy who sold shares worth Rs.247 million. Executive director Kaizad Bharucha, too, offloaded shares worth Rs.93.3 million. 

Outgoing CEO Aditya Puri also exited his remaining holding of 2.85 million shares worth Rs.3.55 billion. Currently, total insider selling in FY21 stands at Rs.17.43 billion, of which Puri accounted for Rs.11.98 billion, followed by Bharucha’s Rs.475 million and Parthasarthy’s Rs.364 million.

Despite Puri’s total exit, most analysts have maintained their ‘buy’ rating on the stock. Axis Securities states, “The bank’s portfolio mix with higher share of salaried segment, strong liability franchise and better operating profit makes it resilient enough to handle any post moratorium stress which may come up.” 

During the Q2FY21 earnings call, the bank’s management informed that retail collection efficiency for September was at 99% for non-moratorium loans and 97% for moratorium loans. Driven by this upbeat commentary and strong asset quality, the stock is among Elara Capital’s top picks with a target price of Rs.1,460.

Meanwhile, Ambit Capital Research is the lone brokerage which has a ‘sell’ rating citing senior level exits and the change of guard from Puri to Sashidhar Jagdishan. Its analysts opine that the new management will find it difficult to replicate previous success. 

Mutual funds have cut their holding from 14.04% in June 2020 to 13.95% in September 2020. While ICICI Prudential MF has brought down its holding from 1.14% to 0.90%, SBI MF has reduced its stake from 2.98% to 2.95%. Foreign investors have absorbed that selling by increasing their holding from 37.04% to 37.43%.Foreign investors have absorbed that selling by increasing their holding from 37.04% to 37.43%. Similarly, insurance companies have upped their stake from 3.78% to 4.08%.