Axis Bank shares close 8% up amid talk of Bain Capital investment
Mumbai: Shares of Axis Bank Ltd surged over 9% on Tuesday, its biggest jump in over three and a half years, after Economic Times reported that Bain Capital is in advanced talks with the bank to pick up 5% stake.
The shares closed 8% up at Rs523.05. During the day, the stock rose as much as 9.22% to Rs529 a share—its maximum gains since 16 May 2014. India’s benchmark Sensex Index closed 0.16% down to 33,213.13 points.
According to the report, Bain Capital is in advanced talks with Axis Bank to invest between $750 million and $1 billion.
The report said that the lender is in talks to raise money amidst worsening asset quality and regulatory glare.
“..subsequent secondary deal as well, through which the Bain may grab another 5% stake from existing investors. This may increase its exposure to nearly 10%, taking the total investment to close to $1.5 billion,” the report added.
On 17 October, the bank reported gross non-performing assets was at Rs27,402.32 crore as on 30 September from Rs16,378.65 crore a year ago and Rs22,030.87 crore in June quarter. As a percentage of total loans, gross NPA rose to 5.9% as compared to 5.03% in the previous quarter and 4.17% in the year-ago quarter.
The jump in its bad loans is mainly due to an annual exercise conducted by the Reserve Bank of India (RBI), that pointed out divergence in asset classification for fiscal 2017.
The divergence in gross bad loans stood at around Rs5,630 crore at end March 2017, while divergence in provisions was at Rs1,318 crore. Gross slippages for the quarter was at Rs8,936 crore of which corporate slippages stood at Rs8,110 crore.
“Weakening of balance-sheet, contraction in margins, consistent erosion in adjusted book value, low single-digit return ratio and lesser degree of clarity on credit quality make the stock’s valuations quite vulnerable” said Elara Capital in a 22 October report. The brokerage house has reduced its rating on the stock and lowered its target price to Rs442, down 4% from earlier.
Of the analysts covering the stock, 22 have a “buy” rating, 16 have a “hold” rating, while 14 have a “sell” rating, shows Bloomberg data.