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Emkay Global
AU Small FB (Hold)
Target: ₹1,230
CMP: ₹1,155.15
As per media reports, Sumit Dhir, who was recently hired as Chief Audit Officer (ex-KMB with 19 years of experience), has resigned from the post.
Management’s clarification confirms his resignation. It has mentioned that Sumit Dhir expressed his desire to move back to his home town (Delhi) due to changes in his personal circumstances post Covid second wave. Change in personal preferences of an incoming candidate at such an important position in such a short span of time raises questions on hiring policy.
As per our discussions earlier, management had clarified that it has hired about 100 people in the recent past and some may have left due to the misalignment w.r.t. expectations. According to the management, poaching by peer banks has been rising too, leading to increased attrition.
We believe the resignations in audit/risk functions may raise investor concerns about the sanctity of the books/risk management practices. However, management has tried to allay such concerns and indicated that there were no red flags by the RBI in its recently completed audit.
The bank has steadily ramped up its liability profile, with the CASA pool standing at 26 per cent, but it still remains sub-par compared to best-in-class peers like Bandhan and Equitas. Management instability could impact the trust of investors and depositors as well, and so it needs to be addressed swiftly.
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