Chapter 1A: The HDFC story can be divided into five phases:
1. The birth of a credible independent autonomous domestic financial institution outside of the PSU framework. (1977 to 1992)
2. Prostitution of the HDFC brand, foreign intervention and the rise of the dynasty.(1993 to 2004)
3. Hyper growth of the bank, funded and catalysed by the foreign intervention with a proxy Chairman. (2004 to 2014)
4. Start of bubble, unexpected exits, regulatory action and inability to get off the tiger. (2015 to 2023)
5. Post merger confusion, insubordination, change of guard and inability of the foreign hand to continue remote control. (2024 onwards)
First phase was 15 years, then 11 years, then 10 years, then 8 years
Fifth phase is now in second year.
Will HDFC have a sixth phase or does it end at the fifth phase ? How short could this phase be in light of cybersecurity, crypto and ai related challenges.
To understand the journey this far is critical to understanding the possible future trajectory of HDFC.
Why the merger was a mistake and why there is no option but to break up the bank to ensure its continued growth and success – as well as its return to the vision of the original founders.
But who were the real founders of HDFC ?
HDFC was not a public sector company. It was probably the first true startup that India had way back in 1977. It started operations in 1979, within a year or so of incorporation.
The original idea took root between two individuals – HH the Aga Khan and a civil engineer from LIC who had helped construct some of the marquee LIC buildings around the country. He became the first CEO of HDFC. Few know of him because the sponsored books on HDFC don’t ever name him. His name was TN Nagendra and he led HDFC from 1978 to 1988. But he was neither a CA nor a banker. So JRD Tata suggested that he bring in a Banker to be the titular Chairman of the company. And that is how HT Parekh who had just retired from ICICI was roped in to don the mantle of a name sake Govt face.
With limited resources, no market operations and an unknown brand – they struggled to find employees. Through friends and family – some young graduates were onboarded as the startup team. This included Manju Malkani and Mahua Ghosh. And complimenting them was one executive secretary Behroz Sethna, a guard Jaspal Singh, driver Laxman and peon Harilal. Most live to this date and helped me put the jigsaw together.
The Aga Khan helped bring in his devout follower Nasser Munji – a Cambridge educated economist. And in response the founding team managed to bring in a CA Gold medallist – Pradeep Shah – from ICICI. Pradeep took leave of absence from ICICI to join HDFC. It helped that his father knew the promoters and that reduced family pressure to take the gamble.
Note this was a point when the startup had no money, no real path to money … and no organisation.
Also note – there was no Deepak Parekh or Keki Mistry or Aditya Puri or Renu Sud.