Axis Finance IPO: Axis Bank MD Amitabh Chaudhry confirms it's ‘very much on’

Axis Finance Ltd’s initial public offering (IPO) process is “very much on”, confirmed Amitabh Chaudhry, managing director and chief executive officer of Axis Bank, on Wednesday, even as the lender awaits final regulatory clarity from the Reserve Bank of India (RBI).

Chaudhry said the bank continues to evaluate options to raise capital for the non-banking financial arm and that listing remains an eventual step in the process.

“On Axis Finance, we are going through a process… we will continue to evaluate our options and do the right thing... Axis Finance would become an upper-layer NBFC very soon, given the size of AUM we have, and that will also mean that we will ultimately get on this path of listing it at some stage in the future,” he said on the lender’s September quarter earnings conference call.

“...please be aware of the fact that Axis Bank is growing quite well. It had capital requirements, and we do need to ensure, as the owner of Axis Finance, that they get capital at the right time. So, we will continue to evaluate our options and do the right thing for Axis Finance,” he added.

Chaudhry’s comments come as the RBI, in its 1 October monetary policy announcement, withdrew its draft circular that proposed restricting banks and their NBFC arms from engaging in the same lines of lending business. The move was widely welcomed by the banking industry, as it removes potential concerns over overlap between parent banks and their lending subsidiaries.

“Based on feedback and review, the proposed bar on overlap in the businesses undertaken by a bank and its group entity is being removed. The circular envisages to streamline the activities being undertaken by banks and their group entities while providing more operational freedom to the banks and non-operative financial holding companies for equity investments and setting up group entities, respectively,” said the RBI's statement on developmental and regulatory policies.

In October 2024, the RBI proposed that banks and their group NBFCs should not undertake identical activities, particularly in retail and small and medium-sized enterprises lending, to avoid regulatory arbitrage. However, the regulator later indicated that it would revisit the framework to provide more operational flexibility to banks, a move that could directly benefit large lenders, such as Axis Bank, which have sizeable NBFC arms.

Revised framework awaited

Chaudhry said Axis Bank is awaiting further details on the revised framework. “We are awaiting details of what the RBI has in mind… Hopefully, the final business circular is not very far away, and that will give us a clear direction in terms of what flexibility and leeway we have,” he said.

Axis Finance, a wholly owned subsidiary of Axis Bank, was set up in 2010 and operates as a diversified NBFC engaged in wholesale lending, structured credit, and retail finance. The company’s assets under management have grown steadily in recent years, putting it on track to be classified as an upper-layer NBFC under the regulator's four-tier scale-based framework.

“Right now, the team is focused on making sure that they continue to grow the way they are growing, and we continue to find ways to support them in terms of capital, and that's the priority. As and when they reach a certain threshold, they will become an upper-layer NBFC, and it's a matter of building the book and reaching a certain number, but we don't have a view on when that particular timeline will be adhered to,” said executive director Subrat Mohanty while answering a query on when Axis Finance would become an upper-layer NBFC.

Being classified in the upper layer brings stricter prudential and governance requirements, including enhanced capital norms and public listing within a stipulated period, typically three years of notification. This classification aligns Axis Finance with larger systemically important NBFCs such as Bajaj Finance and Tata Capital.

For the quarter ended 30 September, Axis Finance's overall assets under finance grew 23% on-year to ₹43,012 crore. Of which, the retail book grew 24%, and the share of its retail and MSME book increased to 55% of the total book. Axis Finance remains well capitalized with a total capital adequacy ratio of 19.82% as at September end, and its loan book quality remains strong with a net bad loan ratio of 0.42%.

If Axis Finance proceeds with its listing, it will join a small but growing club of bank-promoted NBFCs that have tapped the capital markets. HDFC Bank’s subsidiary HDB Financial Services, IDFC First Bank’s erstwhile parent IDFC Ltd, and State Bank of India's associate SBI Cards and Payment Services are some examples of financial subsidiaries or affiliates that have gone public.

Axis Bank’s plan to bring Axis Finance to the market comes as the central bank tightens oversight over large NBFCs, ensuring they adhere to standards closer to those of banks.