Specialist in Indian Banking and Economic Research

Hemindra Hazari

Housing Development Finance Corporation / ESG

Housing Development Finance Corporation (HDFC IN)

In a significant event, Deepak Parekh, the non-executive chairman of <a href="https://www.smartkarma.com/entities/housing-development-finance-corporation" target="_blank" data-smartkarma-citation="entities:252:1" rel="noopener">HDFC Limited (HDFC IN)</a>, agreed to <a href="https://www.sebi.gov.in/enforcement/orders/feb-2021/summary-settlement-order-in-respect-of-mr-deepak-parekh-the-matter-of-non-compliance-with-the-erstwhile-listing-agreement_49028.html" target="_blank" rel="noopener">settle</a> with the Securities and Exchange Board of India (SEBI) in connection with the latter’s investigation of non-compliance with the erstwhile Listing Agreement.  Parekh settled the issue by paying Rs 937,500 (US$ 12,727) to SEBI “without admitting or denying the findings of fact and conclusions of law…” As per SEBI’s settlement order, the capital market regulator had conducted an investigation into an inter-corporate deposit (ICD) of Rs 7.5 bn extended by HDFC to Gliders Buildcon Realtors, a group company of Piramal Realty, in FY2012. Sometime in FY2015, at the request of Gliders Buildcon, HDFC converted the ICD into a term loan. Parekh was chairman of HDFC, and was on the committee which approved the loan. At the same time, he also belonged to the Advisory Board of the Piramal Group, including Piramal Realty, for which he received advisory fees for the calendar years 2011 to 2015 and for the FY2017 and FY2018. The order stated, “HDFC has adopted a Code of Conduct for all its Directors and Senior Management Personnel in terms of Clause 49 (I) (D) of the erstwhile listing agreement. However, the applicant failed to comply with the Code of Conduct of HDFC Ltd., resulting in the violation of Clause 49 (I) (D) (ii) of the erstwhile listing agreement.”What is surprising is that an individual of Parekh’s stature and experience, in a company which is a favourite of foreign investors and professes to maintain high standards of corporate governance and transparency, could have committed such a violation. Normally, board directors disclose their interests and recuse themselves from discussions where there may be even perceived conflicts of interest. In this particular case, Parekh was on the HDFC committee which approved the conversion of an ICD into a term loan for Gliders Buildcon, while also accepting advisory fees from the Piramal group. SEBI’s settlement order throws a spotlight on Parekh’s advisory role to companies (especially in real estate), from which he earns fees, while simultaneously being on the important loan committee of HDFC, which extends loans to corporates, many of whom are engaged in real estate. It is also disheartening that HDFC has neither publicly clarified this issue nor provided any explanation for the conduct of their non-executive chairman.The business media, apart from summarising the SEBI settlement order, has completely ignored the event, by neither analysing the implications nor providing additional information. Given the iconic stature of Parekh in India’s financial system and the prominence of HDFC, one expected the media and the sell-side to further investigate and comment on this important development. Sadly, the state of business journalism and sell-side research is such that when it comes to prominent companies and iconic business leaders, critical reporting and analysis are eschewed. The critical issue before HDFC from a corporate governance perspective is how the board of directors will view the payment by its chairman in settlement of an investigation by the capital markets regulator. Although the settlement order clearly states that the monetary payment does not imply admission of guilt or wrong doing, HDFC’s <a href="https://www.hdfc.com/allpolicies/Policy_on_Fit_and_Proper_Criteria_HDFC.pdf" target="_blank" rel="noopener">Fit and Proper Criteria</a>  for its directors, has a section on whether its directors “have come to the adverse notice of regulators such as SEBI…” As HDFC accepts deposits from the public, has a foreign shareholding of 72% and is the parent of prominent companies in the financial system such as <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a>, <a href="https://www.smartkarma.com/entities/hdfc-asset-management-co-ltd" target="_blank" data-smartkarma-citation="entities:27027:1" rel="noopener">HDFC Asset Management Co Ltd (HDFCAMC IN)</a>, <a href="https://www.smartkarma.com/entities/hdfc-standard-life-insurance" target="_blank" data-smartkarma-citation="entities:26004:1" rel="noopener">HDFC Standard Life Insurance (HDFCLIFE IN)</a> and HDFC Ergo General Insurance, the conduct of its board directors, and especially its chairman, must be pristine. The role of HDFC’s independent directors and its Nominations and Remuneration Committee (NRC) in responding to Parekh’s payment settlement with SEBI and his eligibility to continue as a director will be closely watched by the capital market, and it may also set an example of how boards should respond when faced with such a situation. It is worth recalling that, even though there was no conclusive evidence of his wife’s wrongdoing, Caesar declared that “Caesar’s wife must be above suspicion”, and divorced her.

In a significant event, Deepak Parekh, the non-executive chairman of HDFC Limited (HDFC IN), agreed to settle with the Securities and Exchange Board of India (SEBI) in connection with the latter’s investigation of non-compliance with the erstwhile Listing Agreement.  Parekh settled the issue by paying Rs 937,500 (US$ 12,727) to SEBI “without admitting or denying the findings of fact and conclusions of law…” As per SEBI’s settlement order, the capital market regulator had conducted an investigation into an inter-corporate deposit (ICD) of Rs 7.5 bn extended by HDFC to Gliders Buildcon Realtors, a group company of Piramal Realty, in FY2012. Sometime in FY2015, at the request of Gliders Buildcon, HDFC converted the ICD into a term loan. Parekh was chairman of HDFC, and was on the committee which approved the loan. At the same time, he also belonged to the Advisory Board of the Piramal Group, including Piramal Realty, for which he received advisory fees for the calendar years 2011 to 2015 and for the FY2017 and FY2018. The order stated, “HDFC has adopted a Code of Conduct for all its Directors and Senior Management Personnel in terms of Clause 49 (I) (D) of the erstwhile listing agreement. However, the applicant failed to comply with the Code of Conduct of HDFC Ltd., resulting in the violation of Clause 49 (I) (D) (ii) of the erstwhile listing agreement.”What is surprising is that an individual of Parekh’s stature and experience, in a company which is a favourite of foreign investors and professes to maintain high standards of corporate governance and transparency, could have committed such a violation. Normally, board directors disclose their interests and recuse themselves from discussions where there may be even perceived conflicts of interest. In this particular case, Parekh was on the HDFC committee which approved the conversion of an ICD into a term loan for Gliders Buildcon, while also accepting advisory fees from the Piramal group. SEBI’s settlement order throws a spotlight on Parekh’s advisory role to companies (especially in real estate), from which he earns fees, while simultaneously being on the important loan committee of HDFC, which extends loans to corporates, many of whom are engaged in real estate. It is also disheartening that HDFC has neither publicly clarified this issue nor provided any explanation for the conduct of their non-executive chairman.The business media, apart from summarising the SEBI settlement order, has completely ignored the event, by neither analysing the implications nor providing additional information. Given the iconic stature of Parekh in India’s financial system and the prominence of HDFC, one expected the media and the sell-side to further investigate and comment on this important development. Sadly, the state of business journalism and sell-side research is such that when it comes to prominent companies and iconic business leaders, critical reporting and analysis are eschewed. The critical issue before HDFC from a corporate governance perspective is how the board of directors will view the payment by its chairman in settlement of an investigation by the capital markets regulator. Although the settlement order clearly states that the monetary payment does not imply admission of guilt or wrong doing, HDFC’s Fit and Proper Criteria  for its directors, has a section on whether its directors “have come to the adverse notice of regulators such as SEBI…” As HDFC accepts deposits from the public, has a foreign shareholding of 72% and is the parent of prominent companies in the financial system such as HDFC Bank (HDFCB IN), HDFC Asset Management Co Ltd (HDFCAMC IN), HDFC Standard Life Insurance (HDFCLIFE IN) and HDFC Ergo General Insurance, the conduct of its board directors, and especially its chairman, must be pristine. The role of HDFC’s independent directors and its Nominations and Remuneration Committee (NRC) in responding to Parekh’s payment settlement with SEBI and his eligibility to continue as a director will be closely watched by the capital market, and it may also set an example of how boards should respond when faced with such a situation. It is worth recalling that, even though there was no conclusive evidence of his wife’s wrongdoing, Caesar declared that “Caesar’s wife must be above suspicion”, and divorced her. 

The Significance of Caesar’s Wife for the HDFC Board

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

As we highlighted in last week’s Int’l Compass, the weight of the evidence suggests commodities are in the early stages of a new secular bull market. Global Materials remains a favorite Sector overweight and we believe outperformance is likely to continue considering the Sector’s long-term bullish RS reversal. Additionally, we are upgrading equal-weighted Energy to overweight due to bullish price and RS inflections -- add exposure with a focus on small- and mid-caps.

As we highlighted in last week’s Int’l Compass, the weight of the evidence suggests commodities are in the early stages of a new secular bull market. Global Materials remains a favorite Sector overweight and we believe outperformance is likely to continue considering the Sector’s long-term bullish RS reversal. Additionally, we are upgrading equal-weighted Energy to overweight due to bullish price and RS inflections -- add exposure with a focus on small- and mid-caps.

Global Commodity-Related Equity Sectors In Secular Bull

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analysed the earning revision of component stocks of MS-India in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on Hindustan Petroleum, National Aluminium, Oil &amp; Natural Gas, Vedanta, Tata Motors Passenger Vehicles, ICICI Bank.</li>
</ul>


We analysed the earning revision of component stocks of MS-India in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on Hindustan Petroleum, National Aluminium, Oil &amp; Natural Gas, Vedanta, Tata Motors Passenger Vehicles, ICICI Bank.


MS-India Index Earning Revision (Jun): Hindustan Petroleum, National Aluminium, Oil & Natural Gas

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/geddit-convenience-pvt-ltd-zepto" target="_blank" data-smartkarma-citation="entities:35873:1" rel="noopener">Zepto</a> is looking to raise about US$1bn in its upcoming India IPO.</li>
<li>Zepto Ltd is a quick-commerce company, focused on delivering groceries and everyday essentials within minutes through a network of dark stores and a technology-enabled logistics platform.</li>
<li>In this note, we talk about the not-so-positive aspects of the deal.</li>
</ul>



Zepto is looking to raise about US$1bn in its upcoming India IPO.
Zepto Ltd is a quick-commerce company, focused on delivering groceries and everyday essentials within minutes through a network of dark stores and a technology-enabled logistics platform.
In this note, we talk about the not-so-positive aspects of the deal.


Aequitas - Zepto - The Negatives - Losses Will Continue

<a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a>, India’s largest bank by market capitalisation appears to be the first off the block in demanding resignations from permanent staff at its non-bank finance company (NBFC) subsidiary, HDB Financial Services (HDB FS). While times are indeed difficult, stakeholders in the bank should note the manner in which the bank has conducted this covert operation. Officially, on Twitter, HDFC Bank <a href="https://twitter.com/ravisunHDFCBank/status/1259202460876505093" target="_blank" rel="noopener">states</a>, “no termination notices have been issued”, while numerous HDB FS staff are countering the bank by <a href="https://twitter.com/search?q=hdb%20financial%20services&amp;src=typeahead_click" target="_blank" rel="noopener">stating</a> that human resources personnel are calling them and demanding their resignation. The play with words by India’s largest private sector bank does not show its credibility and transparency in a favourable light. If the bank believes that in the changed environment of Covid-19 they are over-staffed, they should be upfront about it, introduce a retrenchment scheme for the identified staff and inform the public. Instead it appears the public and investors are being misled by the official spokesperson of the bank. The bank is focusing on the increase in head count in the period ending March 31, 2020, when the allegation is that the bank has taken the decision to remove staff after that date. The bank is not even prepared to acknowledge that they are downsizing. HDFC Bank’ statement also goes on to state, “as a group we do not operate like this.” Indeed, for this highly profitable group, which <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/hdfc-bank-gets-mandate-to-receive-donation-for-pm-cares-fund/articleshow/74996448.cms?from=mdr" target="_blank" rel="noopener">donated</a>  Rs 1.5 bn to the PM Cares Fund and is the banker for the same, to push out low-level staff and not own up to it is a dark stain on the HDFC brand. Moreover, it creates doubts in the public’s mind about the state of affairs at the bank, and the credibility of its official statements.Banking is all about trust, as the age-old adage says, “a banker’s word is his bond”. In these volatile times, HDFC Bank is in an unusual position (for it) of its share price being under pressure. In such a situation, if the bank’s official statements are seen as being misleading, stakeholders may turn extra cautious, and a public relations and labour issue may morph into a much larger issue. As it is the stock market is apprehensive regarding other cracks in governance at HDFC Bank: the CEO succession <a href="https://hemindrahazari.com/2020/01/24/hdfc-bank-succession-sumo-wrestling-is-a-spectator-sport-for-the-board/" target="_blank" rel="noopener">fiasco</a>, independent director, Sandeep Parekh’s <a href="https://hemindrahazari.com/2020/02/11/can-a-director-of-hdfc-bank-comment-on-bank-matters-in-his-personal-capacity/" target="_blank" rel="noopener">unauthorised</a> public statements on the bank as well as the bank’s <a href="https://hemindrahazari.com/2019/08/21/as-the-economy-slumps-can-hdfc-banks-retail-strategy-escape-being-dragged-down/" target="_blank" rel="noopener">unsecured</a> lending. This analyst has been concerned, and has <a href="https://hemindrahazari.com/2020/04/19/hdfc-bank-rectifies-bizarre-defiance-to-reserve-bank-of-indias-directives/" target="_blank" rel="noopener">documented</a> the major lapses by the Bank’s board of directors. Sadly the manner in which the bank is implementing downsizing only heightens these concerns.

HDFC Bank (HDFCB IN), India’s largest bank by market capitalisation appears to be the first off the block in demanding resignations from permanent staff at its non-bank finance company (NBFC) subsidiary, HDB Financial Services (HDB FS). While times are indeed difficult, stakeholders in the bank should note the manner in which the bank has conducted this covert operation. Officially, on Twitter, HDFC Bank states, “no termination notices have been issued”, while numerous HDB FS staff are countering the bank by stating that human resources personnel are calling them and demanding their resignation. The play with words by India’s largest private sector bank does not show its credibility and transparency in a favourable light. If the bank believes that in the changed environment of Covid-19 they are over-staffed, they should be upfront about it, introduce a retrenchment scheme for the identified staff and inform the public. Instead it appears the public and investors are being misled by the official spokesperson of the bank. The bank is focusing on the increase in head count in the period ending March 31, 2020, when the allegation is that the bank has taken the decision to remove staff after that date. The bank is not even prepared to acknowledge that they are downsizing. HDFC Bank’ statement also goes on to state, “as a group we do not operate like this.” Indeed, for this highly profitable group, which donated  Rs 1.5 bn to the PM Cares Fund and is the banker for the same, to push out low-level staff and not own up to it is a dark stain on the HDFC brand. Moreover, it creates doubts in the public’s mind about the state of affairs at the bank, and the credibility of its official statements.Banking is all about trust, as the age-old adage says, “a banker’s word is his bond”. In these volatile times, HDFC Bank is in an unusual position (for it) of its share price being under pressure. In such a situation, if the bank’s official statements are seen as being misleading, stakeholders may turn extra cautious, and a public relations and labour issue may morph into a much larger issue. As it is the stock market is apprehensive regarding other cracks in governance at HDFC Bank: the CEO succession fiasco, independent director, Sandeep Parekh’s unauthorised public statements on the bank as well as the bank’s unsecured lending. This analyst has been concerned, and has documented the major lapses by the Bank’s board of directors. Sadly the manner in which the bank is implementing downsizing only heightens these concerns. 

HDFC Bank’s Downsizing Programme: Disturbing Lack of Humanity and Transparency

India

HDFC Asset Management is a leading Indian investment manager, serving as the asset management arm of HDFC Bank. It provides a comprehensive suite of savings and investment products, including mutual funds, portfolio management services (PMS), and alternative investment funds (AIF) across various asset classes. The company is headquartered in Mumbai, Maharashtra, India, and was founded in 1999 (commenced operations in 2000).

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HDFC Asset Management (HDFCAMC IN)

The Significance of Caesar’s Wife for the HDFC Board

The role of HDFC’s independent directors in responding to Deepak Parekh’s payment settlement with SEBI and his eligibility to continue as a...

Hemindra Hazari

MS-India Index Earning Revision (Jun): Hindustan Petroleum, National Aluminium, Oil & Natural Gas

We analyzed MS-India's consensus for Jun 2026 and highlighted changes of EPS in Hindustan Petroleum, National Aluminium, Oil & Natural Gas,...

Ke Yan, CFA, FRM

Aequitas - Zepto - The Negatives - Losses Will Continue

Zepto is looking to raise about US$1bn in its upcoming India IPO. In this note, we talk about the not-so-positive aspects of the deal.

Sumeet Singh

HDFC Bank’s Downsizing Programme: Disturbing Lack of Humanity and Transparency

HDFC Bank (HDFCB IN), India’s largest bank by market capitalisation appears to be the first off the block in demanding resignations from permanent...

Hemindra Hazari

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52-week Range

Market Cap (USDm)

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The Significance of Caesar’s Wife for the HDFC Board

The role of HDFC’s independent directors in responding to Deepak Parekh’s payment settlement with SEBI and his eligibility to continue as a...

Hemindra Hazari

Global Commodity-Related Equity Sectors In Secular Bull

We believe commodities are in the early stages of a new secular bull market. Global Materials & Energy remain our favorite Sector overweights - add...

Vermilion Research

MS-India Index Earning Revision (Jun): Hindustan Petroleum, National Aluminium, Oil & Natural Gas

We analyzed MS-India's consensus for Jun 2026 and highlighted changes of EPS in Hindustan Petroleum, National Aluminium, Oil & Natural Gas,...

Ke Yan, CFA, FRM

Aequitas - Zepto - The Negatives - Losses Will Continue

Zepto is looking to raise about US$1bn in its upcoming India IPO. In this note, we talk about the not-so-positive aspects of the deal.

Sumeet Singh

HDFC Bank’s Downsizing Programme: Disturbing Lack of Humanity and Transparency

HDFC Bank (HDFCB IN), India’s largest bank by market capitalisation appears to be the first off the block in demanding resignations from permanent...

Hemindra Hazari