Home >Industry >Banking >Axis Bank to raise Rs15,000 crore via share sale
Some private equity players have shown interest in buying Axis Bank shares in the proposed QIP (Bloomberg)
Some private equity players have shown interest in buying Axis Bank shares in the proposed QIP (Bloomberg)

Axis Bank to raise Rs15,000 crore via share sale

  • The bank will raise the money through issuance of equity shares or depository receipts, or any other convertible securities linked to equity shares
  • With the move, the bank has joined the trend of equity capital raising many other banks are following to bolster their capital buffers for the future

The country's third largest private lender, Axis Bank Ltd., on Thursday said that the bank will raise up to 15,000 crore. Its board has approved the fund-raising through the issuance of various instruments.

The bank will now raise the money through issuance of equity shares or depository receipts, or any other convertible securities linked to equity shares, Axis Bank said in an exchange filing.

On Thursday, Axis Bank said it will raise the money through a qualified institutions placement (QIP) or issuance of American depository receipts (ADRs) or a global depository receipts (GDRs) programme. The bank may also adopt the preferential allotment route to raise the capital. The mode of capital raising will be subject to the approval of the board and the bank's shareholders at the ensuing 26th Annual General Meeting of the bank.

At 11:15 am, Axis Bank was trading at 424 down 2.14% from its previous close, while the benchmark index, Sensex gained 0.93% to 35745.39. From the beginning of the year, Axis Bank lost 44% against a drop of 13% in the benchmark index, Sensex. From the March lows, Axis Bank gained 49% and Sensex was up 36%.

"Some private equity players, including Carlyle, KKR and Fidelity, have shown interest to buy Axis Bank shares in the proposed QIP. Even Bain Capital, which already holds shares in Axis Bank, is keen to increase its investment in the bank," said a person aware of the matter.

With its latest move, Axis Bank has joined the trend of equity capital raising, which is being followed by many other banks to bolster their capital buffers for the future.

Banks fear that once the loan moratorium period is over, there could be higher loan defaults and losses, which may require higher provisioning and write-offs, for which extra equity capital might come in handy.

Axis Bank's capital adequacy ratio for fiscal 2020 stood at 17.53%, while the bank's common equity tier 1 ratio stood at 13.34%. Earlier, for the December quarter, Axis Bank had said it recorded 5,124 crore worth of slippages from the loan book.

In addition, slippages from the investment book were at 1,090 crore, largely from one housing finance company account, said the bank. The gross corporate slippages for the quarter (including investment portfolio) stood at 3,891 crore, of which 81% came from clients previously rated BB and below for the December quarter.

Several Indian lenders are either in the process of raising equity capital or have already done so.

On 28 June, Mint reported that the country's largest private lender, HDFC Bank, is planning to raise 10,000 crore- 13,000 crore via share sales in India and issuance of ADRs in the third quarter of 2020-21.

The impact of loan moratorium and the slowing credit growth will start coming to the books of most large banks, including HDFC Bank, from September or from the third quarter of this fiscal year.

Several Indian banks are raising capital through fresh share sales to fortify themselves against covid-19–induced economic shocks.

There are widespread apprehensions that the countrywide suspension of businesses due to the prolonged lockdown will result in borrowers finding it tough to repay loans, which may swell slippages and force lenders to go for higher provisioning and loan write-offs after the September quarter.

Several commercial banks such as IDFC First Bank, RBL Bank, Kotak Mahindra Bank, Bank of Baroda, Yes Bank and IndusInd Bank have either already raised equity capital or are in the process of raising capital.

On 26 June, Bloomberg reported that ICICI Bank Ltd. is considering raising as much as $3 billion in a share sale as the lender seeks to bolster its capital ratio.

ICICI Bank has already raised about $409 million by paring stakes in its publicly-traded units, including ICICI Prudential Life Insurance Co. and ICICI Lombard General Insurance Co., according to exchange filings.

The country’s lenders may have to raise $20 billion of cash over the next year, according to Credit Suisse Group AG. Of that amount in expected fundraising, state-run banks are estimated to need $13 billion from the government to recapitalize.

Carlyle, KKR and Bain Capital declined to comment on the story. "As a general practice, we do not comment on individual holdings or our investment decisions," said a Fidelity Investments spokesperson.

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