On October 26, 2020, Aditya Puri, Founding Managing Director of HDFC Bank, stepped down from executive responsibilities at India’s largest private sector bank (by assets). His exit marked the end of the longest tenure of anyone at the helm of a bank in India. Under his leadership, in the 26 years since its inception, HDFC Bank’s market capitalisation increased to over ₹ 6 lakh crore, making it the largest bank in India by market cap. Interestingly, HDFC Bank’s market cap is larger than the combined market value of 22 listed public sector banks put together1. In contrast, the State Bank of India, India’s largest bank, whose total assets are two-and-a-half times that of HDFC Bank, had a market cap of ₹1,90,000 crore in September 2020.
During this quarter century, the Bank handsomely rewarded its investors—over 23 times more than the Sensex. Between July 1996 and June 2020, an investment of ₹ 1,00,000 in HDFC Bank grew to roughly ₹ 3,26,00,000— indicating a 326x growth in 25 years. During the same period, the same investment in Sensex companies registered only a modest growth of 14x. Through its prudent bottom-line focus, the Bank compensated its shareholders with a return on capital employed (ROCE) that ranged between 15 and 21 per cent, perhaps the best in the Indian banking industry.
HDFC Bank followed a different strategy; from around 2008, it did not have a separate PSL Department. Instead, in every single business— corporate, retail, SME, or the emerging corporate’s group—the Bank identified businesses, segments, and customers that would fall within the priority sector categories.
This story is from the November 2020 edition of Indian Management.
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This story is from the November 2020 edition of Indian Management.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
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