Stock review: Axis Bank

Stock review: Axis Bank
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First Published: Thu, Sep 24 2009. 12 45 PM IST
Updated: Thu, Sep 24 2009. 12 45 PM IST
Axis Bank has raised Rs3,900 crore through global depository receipts (GDRs) and qualified institutional placements (QIPs). The share offering under both the categories was priced at Rs906.7 per share.
The bank offered 33,044,500 equity shares under the QIP offering and 5,055,500 equity shares in the form of GDRs, with each GDR representing one equity share.
Further, the bank has received its shareholders’ approval for a preferential allotment of up to 10,826,073 equity shares to the promoters; of the total quantity approved the bank is making a preferential allotment of up to 4,902,257 equity shares at Rs906.70 per equity share to Life Insurance Corporation of India (LIC) and New India Assurance.
Outlook
The capital infusion would help the bank in capturing lending opportunities when the demand for credit revives. The management had guided for a 25% growth in the bank’s balance sheet during FY2010.
Besides the core business, the bank is eyeing entry into asset management, private equity and life insurance businesses as well. The resources would aid the bank in meeting the capital expenditure for the new business ventures.
Valuation
We are incorporating the capital raising exercise into our earnings model and revising our estimates upwards by 3.3% for FY2010 and by 4.7% for FY2011.
Based on our revised earnings estimates, our two-stage dividend discount valuation model indicates a price target of Rs1,012. At the current market price of Rs920, the stock trades at 2.0x FY2011E book value per share and 2.3x FY2011E adjusted book value per share.
We upgrade our recommendation on the stock to BUY from hold with a revised price target of Rs1,012.
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First Published: Thu, Sep 24 2009. 12 45 PM IST
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