Mumbai: After raising Rs4,534 crore (about $1.15 billion) of capital through global depository receipts (GDRs), preferential allotments to its existing shareholders and qualified institutional placements (QIPs) with foreign investors, Axis Bank (formerly UTI Bank) is ready to diversify into the financial services space.
“We have become a full-service commercial bank. We don’t need to launch any new products. We have the capital to contemplate diversification into other businesses in the wider financial market,” said Axis Bank chairman and CEO P. Jayendera Nayak.
He did not elaborate on the bank’s diversification plan but banking analysts said Axis Bank could get into the life and non-life insurance business and equity broking to complement its banking business.
Meanwhile, the bank is readying for the launch of its first private equity fund in infrastructure. Its asset management company, set up last year, will launch this fund. “The bank has been doing debt financing for infrastructure and once we start equity financing in infrastructure, it will complement the existing business,” Nayak said.
The asset management company will not target retail investors with schemes that invest in the equity and debt markets.
Axis Bank has also set up a sales and distribution company called UBL Sales, which is essentially a network of sales people, normally appointed by commercial banks as direct sales agents.
UBL Sales now employs 4,000 people who sell Axis Bank’s retail products including credit cards.
The bank has six million depositors and has close to seven million customers.
Its credit card business, launched in August 2006, has three lakh customers. “We are issuing 70,000 new credit cards every month and by March 2008, we should have one million credit card customers,” said Hemant Kaul, president, retail banking, Axis Bank.
ICICI Bank, State Bank of India and Citibank are the three largest players in the credit card business in India, which has been growing at over 40% in the past two years.
Axis Bank has so far issued 6.5 million debit cards, making it the third largest debit card issuer after State Bank of India and ICICI Bank.
Axis Bank had earlier stayed away from auto financing but has recently entered the space. “The rates for auto financing were beaten down to abnormally low level as some banks wanted to have a larger market share. We are into customer acquisition as they (customers) are the lifeline of banks, but we are not for market domination. We are very protective about our capital. We need to be prudent and see the cost-income ratio before entering into any business,” Nayak said.
According to him, the money spent on building the new brand—Axis Bank—is also a sort of an “investment” as it would help the bank acquire new customers.
Founded in 1994 and promoted by the Unit Trust of India (UTI), the erstwhile Indian mutual fund behemoth, Axis Bank was known as UTI Bank till last month. After UTI split into two in 2002—the Specified Undertaking of UTI and UTI Mutual fund—the ownership of the bank went to the Specified Undertaking of UTI.
In fact, all strategic equity holdings of UTI went to this entity and it was decided that only UTI Mutual Fund would use the UTI brand while others could use the brand till January 2008, after paying a royalty to UTI.
The bank wanted to buy the brand but was not allowed to do so.
“We have taken the name Axis Bank. Why Axis? Well, in geometry, axis is a line of reference around which every thing is measured. We can use this metaphor in many ways—axis of growth, axis of stability…. Isn’t it a nice name?” asked Nayak.
The bank, with 280 branches, 2457 ATMs and assets of about Rs80,000 crore, now wants to become an Asian bank. It has set up three branches—in Singapore, Hong Kong and Dubai—and one representative office in Shanghai, which will be converted into a bank.
“Within a year of its operations, our Singapore branch has already created $750 million (Rs3,038 crore) in assets and is profitable. Three years from today, I see foreign operations accounting for 15% of our bank’s total assets. We have metamorphosed into an Asian bank and at the next stage will become a global bank,” Nayak said.
The Axis Bank stock lost 0.09% to close at Rs620 on the Bombay Stock Exchange on Monday; the Sensex, the exchange’s benchmark index, lost 1.55% to close at 14,903.03.