Axis Bank to launch $1.6bn share sale through QIP
Mumbai: Private sector lender Axis Bank is set to launch a $1.6-billion share sale through a qualified institutional placement (QIP) process as soon as this week, in what will be one of the biggest equity capital raises by a bank this year, said two sources briefed on the matter.
The bank had taken the approval of its board in July to raise up to $2.5 billion, or Rs 18,000 crore, and will look to raise at least $1.6 billion as it aims to shore up capital to strengthen its balance sheet at a time when the sector is facing liquidity pressure.
Over half a dozen banks are working on the share sale, including Citi and JP Morgan, according to one of the sources mentioned earlier. An Axis Bank spokesperson said they don’t comment on speculation. One of the sources said, “The management thinks that the next 12 months will continue to remain tough for the sector and the capital will give it buffer.” Shares of Axis Bank closed 1.2% up at Rs 648 on the BSE, giving it a market capitalisation of nearly Rs 1.7 lakh crore. At this price, the sale will involve a 6% stake being sold.
“The improvement in asset quality is expected to grow earnings of Axis Bank on account of lower provisioning,” said a Standard Chartered Securities report dated September 16 on Axis Bank.
Over the last month, the management of the bank has met dozens of investors from pension funds, sovereign wealth funds, mutual funds and hedge funds across New York, London, Toronto, Hong Kong and Mumbai, according to disclosures on stock exchanges.
The latest move will be the most significant fund-raise by the bank after it got Rs 11,626 crore in November 2017 from a consortium led by PE major Bain Capital as “confidence capital” after disappointing results. Life Insurance Corporation (LIC) is the largest shareholder in Axis Bank with 10.4% stake under the promoter bucket.
Since then, the company has also seen a change in top management as Amitabh Chaudhary, former MD and CEO of HDFC Standard Life Insurance, took over from Shikha Sharma in January this year. Sharma had left as MD & CEO amid concerns by the RBI about bad loans in the books of Axis Bank. For first quarter of FY20, Axis reported 95% increase in net profit to Rs 1,370 crore, while net interest income for the quarter rose 13% to Rs 5,844 crore. Axis also downgraded Rs 2,242 crore into the pool of loans it rates below BB during the quarter, taking that book to Rs 7,504 crore.