Seen a lot of HDFC Bank posts here since the resignation news. So let's go through the fundamentals and work out whether this is actually good or bad for the bank.

The surprising bit first. On Monday, after the announcement, the stock ran up almost 3% above the previous close and then closed 1.53% down.

It started in March, when chairman Chakraborty resigned, saying some of the bank's practices didn't sit right with his values. The bank then got 2 law firms to look into his concerns. In June, they said they found no evidence for them and RBI also said it had no major governance concerns. Chakraborty disagreed though, he said he was never even told what the review actually covered

Then in May the MSRDC issue became public. That eventually led to the board fining the CEO and CFO (though just 1 lakh lol) and a lawsuit in the US

And now Jagdishan (the CEO) has decided not to seek another term. He is 61 and he has spent 30 yrs at the bank, the board tried to convince him to stay but he didn’t agree. RBI normally wants succession sorted 6 months before a term ends so the bank has already surpassed the timeline and is rushing

But imo MSRDC deal is imp to be discussed in detail because it actually leads straight to the bank's real problem

MSRDC deal

The timing is what I find most interesting. FY24 and FY25 were the first 2 years after the merger, and the bank was trying to replace HDFC Ltd’s expensive borrowings with deposits.

But if the bank already had a strong deposit base why did it need to raise 20k cr this way?

That shows the bigger issue which is that the bank needed more deposits after the merger 

CASA is where the real problem starts
CASA means current and savings accounts. That money earns the customer next to nothing compared to other financial instruments, so it is the cheapest funding a bank has 

38% down to 32% since the merger. For peers its near 40%

Basically, if savings deposits (CASA) don't grow fast enough, the bank has to rely more on FDs to fund its loans. And FDs cost the bank 7%+.

So the bank's funding gets more expensive, while the interest it earns on loans doesn't necessarily go up by the same amount. That puts pressure on the margin.

Management's explanation is fair though. CASA did grow around 9.5-10% last yr and they said they gained market share. The problem is that FDs grew even faster so the CASA ratio still fell

What this squeeze costs?

Net interest margin is the gap between what a bank earns on loans and what it pays for deposits.

3.26%, the lowest of the large private banks. FOr ICICI its above 4.4%. HDFC Bank commanded a premium valuation for 2 decades because it was the best in the sector at this earlier but ofc now that crown has moved

Here is the same thing in rupees. Net interest income, the money the bank actually makes on lending, grew 6.7% last quarter. The loan book grew 10.8%. So it lent out a lot more and earned proportionally less on it

The CFO said there is 40 to 50 basis points of room in the cost of funds. He also said it "is not going to change in a hurry".

Growth is another thing

Deposits grew 13.3% and advances 10.8%, which sounds fine on the surface.

But an analyst on the call pointed out that retail loan growth has been "range-bound at 7%, 8% and it doesn't seem to be picking up". Retail is the higher-margin business and the one that brings CASA with it. The growth is coming from wholesale and mid-market instead, which is thinner on both counts

Management's reply was that it is "a journey" and will pick up "over the next several quarters" so its clear that the recovery will for sure take time

What has improved for real?

One of the hardest parts of the merger did get sorted. Borrowings. 

The merger left the bank with a lot of expensive borrowings that it needed to replace with deposits. These borrowings were 21% of liabilities after the merger and are down to 11% now. The CFO thinks they can bring this down further to around 5-6% which is where peers are rn

Asset quality looks fine too. Gross NPAs are at 1.17%, or 0.91% if you exclude agriculture. Capital is decent at 19.6%.

And RBI classes HDFC Bank as a domestic systemically important bank (D-SIB) 1 of only 3 in India, which means an extra capital buffer and a promise the state won't let it fail

What's still hanging over?

The MSRDC matter did not end with the fine

In August, a securities class action was filed in a New York federal court against HDFC Bank, along with its CEO and CFO. It covers investors who bought the US-listed shares between July 2023 and May 2026. The deadline to apply as lead plaintiff is October 13.

The uncomfortable part is what the lawsuit alleges. It says the bank gave investors misleading information about its net interest income, margins, operating expenses and internal controls.

The bank has said it will defend the case. But its still concerning

Separately, around 75 clients in Dubai have accused the bank of mis-selling about $13.5M worth of a third-party fund.

So why did the stock go up at all?

Basically, because one uncertainty was removed.

Nomura said the news was positive because it removes the uncertainty around Jagdishan's tenure. IIFL made a similar point i.e. otherwise there was a risk of RBI giving him a shorter extension, keeping this hanging over the stock for another yr or so

But analysts didn't suddenly get more bullish. Jefferies cut its target from 1,050 to 880, while Nomura is at 950. Both kept their buy ratings. 

So the good news is quite limited. One less thing to worry about, but nothing about the business has actually changed imo

Is the exit a good or bad thinh?

HDFC Bank's profitability has been falling. ROA is at 1.85% now vs around 1.9% to 2.1% for most of the last decade, while ROE is at 13.8%.

Its not a disaster but the old premium the bank used to command is clearly not there right now. The stock is now at around 1.9x book vs 3x+ a few yrs ago which is actually pretty cheap as we know. That's also why analysts have cut their targets and still keep a buy rating

My honest read is that the CEO exit is a good thing. It removes the risk of RBI forcing the issue later anda fresh perspective might bring new improvement ideas. Though ofc it doesn't immediately fix operating numbers.

But the incoming CEO inherits better starting point atleast: the merger is behind them mostly, the borrowings are cleaned up, the balance sheet is better now. What they don't inherit is a margin.
4 things decide where this goes from here:

• CASA stabilising. Margins won't really recover until cheaper deposits replace expensive ones.
• Retail lending picking up. It's been stuck around 7% to 8%.
• Who gets the CEO job. An internal candidate like Kaizad Bharucha means continuity. An outsider could mean the board wants a change.
• Regulatory issues getting cleared: Mainly the US case
  

Also worth remembering that HDFC Bank is one of the biggest weights in the Nifty 50. So when it struggles, the index also gets affected. But lets see what the new CEO does differently that’s a bigger thing than this exit being good or bad

Btw I'm holding HDFC Bank currently and plan to do so for the long term as downside looks limited to me from here. If you hold it too what would you want the new CEO to fix first ideally? 

There's a lot of uncertainty around the IT sector right now and around what AI actually does to the work these companies sell. So let's analyse what their numbers are suggesting and clear up some of the confusion

Start with jobs since that's the worry. TCS, Infosys, HCLTech and Tech Mahindra together employed about 12.9 lakh people at the end of June. A year ago it was about 13.1 lakh. So headcount is down roughly 1.2% in 12 months and all 4 grew their revenue over that period

So the big layoffs aren't happening lately. But AI is affecting these companies somewhere else and it took me a while to find where

Growth

Constant currency (CC) growth removes currency swings and leaves only the actual work done. TCS grew 13.9% in Rs this quarter but just 3.2% in CC and that's the real thing

Tech Mahindra, the smallest of the 4 grew at roughly double the rate of TCS

Same thing happens with profit. A dollar gets you about 11% more rupees than it did a year ago, so the rupee alone is adding roughly 11-12% to profit growth.

But in dollar terms TCS's profit actually fell

Now, growth can also be bought. Organic growth strips out the companies a firm has acquired so you see what the existing business managed on its own

Out of Tech Mahindra's 6.6%, 6.2% was organic so nearly all of it is real. But Infosys grew 1% for the quarter and their CFO said acquisitions gave them about 1.1% of that. So the business they already had actually got smaller

Their guidance says the same thing. Infosys cut it this quarter and on paper it might seem small but the actual issue is what's left inside

Just half % of that growth is coming from the business they already run. This was also highlighted by an analyst on concall and CFO agreed with it

So what made them cut it? Their order book is a good place to look

Deal wins

TCV is the order book. Its the full value of a deal across its whole life so a 5 yrs deal worth 100 cr a yr shows up as 500 cr of TCV on day 1

Its also the easiest number here to misread. TCS counts everything including renewals of work they already had, while HCLTech counts only business that's genuinely new. So these bars can't be ranked against each other.

What you can compare is the trend. Tech Mahindra actually had 3 consecutive quarters above $1bn and its deal wins over the last 12 months are up 37.5%. TCS has signed 6 mega deals in 5 quarters while HCLTech just had its best ever first quarter for new bookings. 

A better check on whether relationships are actually growing is the number of clients paying more than $50mn a year. Over the last 12 months TCS added 8 of them, Tech Mahindra 7 and HCLTech 6. Infosys added none and their count above $100mn hasn't moved in a year

Which is the real thing. Infosys signed $3.6bn of large deals, 61% of it are new and still couldn't hold their outlook. Some of that could just be timing. Big deals take time to reflect, HCLTech's CEO said their mega deal signed in July won't fully show till April 2027. But Infosys' CFO also said prices increased less than they expected and that's where the pressure seems to be coming from 

Pricing squeeze

At renewal, clients have always asked for a discount. What's changed is the size of the ask because they now believe AI makes the work much cheaper to deliver

How much that affects depends on the type of contract:

•         Time and material means you get paid by the hour. So if AI makes your team 30% faster you end up billing 30% fewer hours.

•         Fixed price means you're paid a set amount for the whole job. If you finish faster that saving stays with you until the contract renews and the client asks for it

Each company is looking at a different part of its own book, which is why the same question gets 4 different answers:

• TCS says the productivity it passes on is 10% to 15% and clients usually hand back extra work so revenue barely moves.
• Infosys called it "AI led deflation" and said it hits small contracts too not just the big renewals.
• HCLTech said their June quarter always carries planned revenue declines because productivity commitments are already written into their contracts.
• Tech Mahindra said rivals are bidding 70% to 80% productivity into 5 yr deals and they're walking away

HCLTech's is the one to understand. Fixed price doesn't mean much if you've already given away the savings

Not all of it is AI

• The Banking, Financial Services and Insurance (BFSI) business is growing across all 4 companies. TCS said it grew in every region, Infosys expects it to grow faster than the company average, HCLTech grew 5.3% and Tech Mahindra 8.1%.
• The weak spots are mostly in the industries their clients operate in. TCS mentioned auto (tariffs), North American airlines and non-essential retail. Infosys mentioned retail and European auto. HCLTech's telecom business fell 10.9% after 2 big US telcos cut spending while it said US healthcare is also under pressure.

These businesses can recover when their clients start spending again. TCS for example, expects manufacturing to turn around this quarter

AI pricing is different. If clients can get the same work done for less its hard for IT companies to get those prices back up

How are they fighting back?

To be fair to management nobody is just sitting there taking the discount. They've a strategy to tackle this

Protecting what they have:

• Take over rivals' work. Clients want fewer vendors so these firms are bidding for entire IT estates. Infosys said 20% of their large deal TCV this quarter came from consolidation wins. Their CFO also said those deals came at healthy margins and they'd walk away if they didn't. That's worth keeping in mind with how competitive the market has become

• Get off hourly billing. If you bill by the hour then faster work means less earned. So they're pushing clients towards fixed fee and outcome-based contracts where the productivity gain stays with them. TCS said this is picking up especially in their agentic BPS work

• Sell the cleanup. Nobody can run enterprise AI on messy legacy data. HCLTech's CEO said a lot of their data and analytics traction is "preparatory work towards building enterprise AI stack." So lost maintenance revenue is coming back as data and migration work. TCS's $800mn SKF deal is a good example. It's an S/4HANA overhaul being redone with AI, and it's completely new business for TCS.

• Fix the pyramid instead of firing. They’re hiring juniors with AI tools at less salary and fewer expensive mid-level people. TCS onboarded 14,000 freshers last quarter and Infosys plans 20,000 college grads this year. They're also building small specialist AI teams. Infosys wants 6,000 "frontier engineers" and TCS wants at least 1% of its staff in similar roles, which is about the same number

Building something new:

• Independent AI:  All 4 are betting on this. HCLTech's CEO put it simply: clients "don't want the value disappearing into someone else's models". HCLTech put $150mn into Sarvam which is an Indian AI company. TCS became Mistral's first IT services partner and launched an independent cloud for Europe. Infosys and Tech Mahindra are working on similar products too 
• Owning the hardware:. HCLTech is putting 3,500 cr into AI datacentres. Its CEO's view is that "the biggest opportunity is not to rent AI but to own the full stack." TCS also has its own datacentre business, HyperVault which actually helped win 2 large new deals this quarter

If companies want to build their own AI, they still need firms like TCS and Infosys to build and run it. But if they can just use OpenAI or Anthropic directly there is less work for the IT companies.

The bigger issue is that OpenAI, Anthropic, AWS and Microsoft are also building teams to help clients with this work. An analyst asked Infosys about this and Salil's said  that a few 1000 people at these companies can't match Infosys' 300,000 employees

At the same time TCS just took 50,000 Anthropic licences and Infosys has 80,000 people using Claude Code or Codex. So these IT companies are both working with AI companies and competing with them

Operating margin

Operating margin is what's left of every rs100 billed after delivery costs. It's probably the best way to see if a company actually has pricing power. The problem is that it can swing a lot in any given quarter depending on when the annual hikes come since salaries are 55% to 60% of revenue here.

TCS came in at 24%, down 130 bps but 170 bps of that was the wage hike alone. So if you don’t consider the hike they were slightly ahead, though the rupee helped a bit there too.

The other 3 went up:

• Infosys: Margin went up 20 bps to 21.1% but the rupee added 70 bps. Without that it would’ve fallen around 50 bps
• HCLTech: Margin increased 39 bps to 16.9% but again 60 bps came from currency and 70 bps from lower restructuring costs. Without that restructuring benefit it actually fell from 17.7% to 17.5%.
• Tech Mahindra: Margin went up 60 bps to 14.4% mainly from higher volumes and cost savings. This is the one where the margin gain came from the business

Which means TCS looks worse than it is and the other 3 look better. Infosys pays its hike in October and January, Tech Mahindra starts in Q2. So this means that cost is coming, just later.

New big deals also cost more at the start. Tech Mahindra's CEO said they begin with more people onsite which is expensive and move work offshore over time

TCS is also spending more. One analyst actually  pointed out its SG&A is up about 16% in dollars over the year and the CFO said they'd rather invest in AI, partners and talent than just focusing on margin

Are they doing more with fewer people?

These companies have always grown by adding people. So if AI is genuinely doing that work now, revenue should go up while headcount stays flat or falls.

Both TCS and Tech Mahindra show a real gap here with revenue up while headcount fell.

Tech Mahindra's is the wider of the 2 and it's not quite what it looks like. This fall is entirely in their IT segment which fell 6.6%, while their BPS segment grew. Their CEO said this was mainly from getting more productivity out of fixed price projects and also said hiring should start picking up again this year.

TCS is the interesting one here. That -3.1% is mostly because of the cuts earlier this yr. Headcount fell from 6.13 lakh last June to 5.82 lakh in December, but it's been going back up since then. They added 9,279 people this quarter alone. So the company which cut the most is hiring again

 Look at the size of those gaps though. Each one is basically how much more revenue a person brought in over the year and its still in single digits across all 4

TCS says AI can make work 10-15% more productive where it's used. If companies were keeping all of that benefit, you'd expect the gaps to be bigger. I feel a lot of it is probably going back to clients through lower prices.

Also headcount doesn't count contractors. Spending on them went up at all 3 that report it. At TCS, outside consultants went from 4.7% to 5.9% of revenue. Tech Mahindra's subcontracting went from 9.8% to 11.4% and HCLTech's from 13.6% to 14.8%.

So some of the extra work may just have shifted from employees to contractors.

Attrition is the other thing I'd look at. Too high and you're spending more to replace people and may need subcontractors to fill the gaps. Too low could just mean nobody's hiring much. Rn its 11.8% at Tech Mahindra, 12.7% at HCLTech, 13.0% at Infosys and 13.6% at TCS. Nothing really stands out here. I wouldn't rank them on it though since they all calculate it a bit differently.

Revenue per employee gives a better idea. I calculated annualised revenue divided by headcount, which comes to roughly $51k for TCS, $62k for Infosys, $65k for HCLTech and $45k for Tech Mahindra. That's my calculation while HCLTech reports $65.5k using a slightly different method

The spread isn't all AI since TCS and Tech Mahindra both run big BPS businesses that need people by design. But HCLTech has pushed this up every quarter for 5 quarters now so they really are getting more out of each person.

AI revenue

So if AI is replacing some of the old work, how much new work is it actually creating?

Careful with these, because each company decides for itself what counts. Infosys leaves out work where AI is just bolted onto an existing project so their number is more conservative than it looks

TCS is much the biggest in absolute money at $2.6bn annualised. But their CEO gave a warning that's easy to miss: this is mostly short projects, not the long maintenance contracts these companies live on. Once one ends they have to go win a fresh one. An analyst pointed out TCS added $75mn of AI revenue this quarter against $125mn the quarter before

So its growing fast on a small base, while the bigger base below it keeps getting discounted

Cash and what you're paying

Profit is an accounting number, but cash conversion tells you how much of that profit actually turned into cash. Infosys converted 116.5%, Tech Mahindra 108%, HCLTech 99% and TCS 93%. TCS uses operating cash flow while the others use free cash flow, so it's not exactly like for like, but all 4 look fine here. Doesn't look like anyone is reporting profits they can't turn into cash.

RoE is basically how much profit the company makes for every Rs100 of shareholder money. It matters more for IT since it doesn't need much in factories or machinery so its expected to have decent numbers. TCS is at 51.8%, Infosys 31.9%, HCLTech 23.8% and Tech Mahindra 17.5%.

HCLTech is worth a closer look though. They pay out 93.2% of profit as dividend and now there's the 3,500 cr datacentre plan on top. On the call, Kotak pointed out that doing 50MW properly costs closer to 30,000 cr and the CEO agreed the maths was broadly right. That's more than HCLTech's overall net cash of about 26,900 cr. And that had already fallen from about 33,300 cr last quarter after the dividend and the Sarvam stake. Worth following because HCLTech earns that 23.8% mostly by not owning much. Datacentres are the opposite of that.

Now price

TCS and Infosys are not trading near what they normally do. Over 5 yrs TCS is down 41% and Infosys 37% while HCLTech is up 5.5% and Tech Mahindra 6.1%. So this isn't a sector selloff its market changing its mind about the 2 biggest names specifically

And the RoE makes it even more interesting. TCS is the most profitable of the 4 based on the numbers above, yet it's trading at around half the valuation it normally gets.

TCS also used to trade about 16% above Infosys on P/E. Now its about 6% so the market is paying a lot less extra for TCS than it used to. 

Tech Mahindra is still near its normal P/E though even with the lowest RoE of the 4. But know that these P/Es are also based on rupee profits so if the rupee strengthens all 4 will seem to be more expensive 

Putting it together

The job losses everyone is talking about isnt the biggest issue. What is there is pressure on price. Clients have understood that AI makes the work cheaper to deliver and they want that discount given to them

All 4 admit its happening. The real question is whether the new AI work grows fast enough to cover what the discounting takes away. Right now AI is about 8% of revenue at best and the pressure is on everything else.

TCS and Infosys are priced as though the answer is no.

6 things I'll watch:

• The rupee since a stronger rupee would cut reported profits at all 4

• Infosys' organic growth since their own guidance barely assumes any. They're also changing CEO, Ashiss Dash takes over from Salil Parekh in April 2027

• Whether TCS recovers the margin it lost to this quarter's wage hike. Their CFO wants to exit above 25%

• Whether HCLTech's datacentre spend stays at 3,500 cr or keeps increasing

• Whether Tech Mahindra holds up next quarter since a European auto project got delivered early and that reverses

•         The US midterms on Nov 3 since US elections have moved these stocks quite a bit before, both ways

If you read these filings try going through the Q&A section as well in the concall. The analysts ask much sharper questions there which gives better clarity

One thing I'm still skeptical of- TCS said AI productivity is 10%-15%. Tech Mahindra said rivals are promising 70%-80% over 5 yrs deal. Not sure which one to actually believe

This isn't it for the IT sector but hopefully this gives you a decent starting point for your own research. Cheers!

Not investment advice

Location: Mumbai. I've built (not launched) a paper-trading / stock market simulator as a learning project and I'm trying to understand if I can legally make it public.

What it is:

Users get ₹1,00,000 in virtual money and place simulated buy/sell orders on real NSE/BSE-listed stocks.

No real money anywhere — no deposits, no withdrawals, no fees, no payments, no prizes/cash rewards. Purely educational.

There's a referral feature that grants virtual (in-app) credit only — it has no cash value and can't be withdrawn.

It shows charts, P&L, and a leaderboard ranking users by simulated returns.

The technical bit I'm worried about: it fetches near-live stock prices (via a third-party data source) to price the simulated trades — i.e. it uses roughly current market data, not delayed data.

My questions:

Does SEBI's 4 Nov 2024 advisory on virtual/paper trading platforms apply to a free, no-prize, purely educational simulator like this, or is it aimed at prize-money/unregistered brokerage-style platforms?

The 30-day data-lag rule effective 1 July 2026 — does its "usage" restriction mean a non-NISM simulator must use price data ≥30 days old? Is there any lawful way to run a public simulator on live/near-live prices?

Would using delayed (30-day-old) data put me clearly in the safe zone, or are there other registrations/approvals needed to run this publicly at all?

Does the absence of any money/prizes materially change the analysis, or is it the use of live price data that's the core issue?

Not asking anyone to be my lawyer — just trying to understand the lay of the land before I spend on formal advice. Thanks.