Mumbai: India’s third largest private sector bank, Axis Bank Ltd, is set to raise fresh equity through global depository receipts (GDR), two investment bankers familiar with the development said.
The bank’s board on Tuesday passed an enabling resolution to raise fresh equity through GDR, qualified institutional placement and preferential issue to promoters. The fresh equity issue could lead to about 10% dilution in the shareholding.
A bank executive familiar with the development said the bank will also come out with a preferential issue to enable the existing promoters to maintain their holding.
“The global depository receipt and preferential issue will be done simultaneously,” he said but declined to be named as he is not the official spokesperson of the bank.
The board has decided to raise up to 7.14 crore equity shares (up to 20% of the present paid-up capital), the bank said in a statement. “The bank is adequately capitalized for its current needs and this enabling resolution will facilitate it to raise capital at an appropriate time to support future growth.”
Axis Bank’s stock on the Bombay Stock Exchange dipped 2.92% to Rs894.65 on Tuesday even as the exchange’s bellwether index, the 30-stock Sensex, fell 0.59% to 15,830.98 points.
The Specified Undertaking of Unit Trust of India (SUUTI) and Life Insurance Corp. of India Ltd (LIC), the principal promoter shareholders of the bank, hold 27.02% and 10.34%, respectively.
Another Axis Bank official with knowledge of the development said that “LIC will put in the necessary capital to maintain its current holding in the bank. The entire capital raising exercise should be complete in the span of two and a half months.” He, too, requested anonymity.
Other promoters of the bank include General Insurance Corp. of India with 2.26%, New India Assurance Co. Ltd with 1.06%, National Insurance Co. Ltd with 0.74%, United India Insurance Co. Ltd, 0.36% and Oriental Insurance Co. Ltd 0.43%
In mid-2007, Axis Bank, then UTI Bank, had raised over $1 billion (Rs4,750 crore now) through a combination of GDR, preferential share issue and qualified institutional placement. SUUTI, which was carved out of the erstwhile Unit Trust of India in 2003, was scheduled to wind up in January 2008. However, the Union government last year extended the deadline till March. Since some of the schemes of SUUTI are still pending closure, it is been proposed that it should stay afloat for another five years to 31 March, 2014.
If SUUTI wants to maintain its holding in Axis Bank after the fresh capital raising, it will have to bring in fresh capital.
The board on Tuesday also appointed M.M. Agrawal as deputy managing director with immediate effect subject to regulatory clearance. He is currently executive director, corporate banking, at the bank. Agarwal’s tenure will come to an end on 31 August 2010.