Shares of HDFC Bank fell around 2 per cent on Thursday, extending losses after an investor filed a securities fraud class-action lawsuit against the lender in the US. The stock is also under pressure amid uncertainty over the succession of managing director and chief executive officer Sashidhar Jagdishan, whose current term ends on October 26, according to media reports.
“Any leadership transition, any uncertainty around leadership transition invariably has an impact on the valuation of the listed entity. For any business,” said a banking analyst with a rating agency.
Shares of HDFC Bank closed at~712 per share, down 2.08 percent on Thursday.
The US lawsuit has added to concerns around the bank’s governance and disclosures. Reuters reported that HDFC Bank shares fell as much as 2.37 per cent during Thursday’s session, taking the stock to a two-and-a-half-year low. The shares have declined more than 25 per cent year to date (YTD).
According to media reports, HDFC Bank investor Jwalant Natvarlal Soneji filed the securities fraud class-action complaint on August 13 in the US District Court for the Southern District of New York. The proposed class covers investors who bought or acquired HDFC securities between July 17, 2023 and May 26, 2026.
The complaint alleges that the bank made misleading statements and did not disclose information that could have been material to investors. The allegations centre on payments of around ~45 crore made to the Maharashtra State Road Development Corporation (MSRDC).
“HDFC has ADRs listed in the US. By virtue of having ADRs, the bank is covered by a broader set of statutory requirements in the US. As a result, whenever there is a potential allegation of frauds f fraud in India, laws relating to bribery and anti-corruption can also come into play can trigger lawsuits,” said a banking analyst.
Media reports said that the complaint alleges that HDFC Bank routed the differential interest paid to MSRDC through its marketing department and presented it as sponsorship expenditure for a road safety campaign. The arrangement allegedly allowed MSRDC to receive an effective interest rate of 6.01 per cent, around 2.51 percentage points higher than the rate offered on other savings accounts.
The complaint relies substantially on a May 27 report by a media organisation, which had reported findings of an internal vigilance investigation into the payments. The lawsuit alleges that the arrangement and related approvals were not adequately disclosed to investors.
The allegations remain unproven and do not amount to a finding by the US court that HDFC Bank or its executives violated securities laws. Media reports mentioned that that the court has issued a summons requiring the bank to respond within 21 days of being served.
The lawsuit follows investigations announced by three US law firms into whether HDFC Bank violated US securities laws through potentially misleading disclosures, according to media reports. The latest action takes the matter from preliminary investigations into formal litigation.
Investor sentiment is also being affected by leadership uncertainty. Reuters reported that traders remain concerned about Jagdishan’s tenure, with the CEO’s term ending on October 26. The issue follows the resignation of former part-time chairman Atanu Chakraborty in March, which had also weighed on the stock.
With the US lawsuit adding a fresh legal overhang and the succession decision still awaited, investors are likely to remain cautious on the stock in the near term.
