Axis Bank to launch $1.6bn share sale through QIP

The Times of India (New Delhi edition) - - Times Business - Mad­hav Chan­chani, Mayur Shetty & Partha Sinha

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.

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