The board of Axis Bank on Friday approved stake sale to private equity player Bain Capital and other investors in its bid to raise capital by issue of equity linked securities on a preferential basis.
The board of Axis Bank on Friday approved a 9 percent stake sale to Bain Capital and other investors including LIC in its bid to raise capital worth Rs 11,626 crore by issue of equity of equity linked securities on a preferential basis.
The issue price of equity Shares at Rs 525 per share while the issue price of convertible warrants is Rs 565 per share. Entities affiliated with Bain Capital propose to invest Rs. 6,854 crore while LIC or Life Insurance Corporation will be issued around 3.02 crore equity shares on a preferential basis to help the bank raise over Rs 1,583 crore, the bank said.
Approved by the Board today, Axis Bank proposes to raise Rs 9,063 crore through issuance of equity and the remaining Rs 2,563 crore through issue of warrants.
The capital raise is subject to shareholders’ approval at the EGM (extraordinary general meeting) of the Bank to be held on December 8, 2017.
“The Board of Directors of the Bank will be convened on 10th November 2017, to consider raising of funds by issue of equity / equity linked securities through permissible mode at an appropriate time…In this connection, we would like to inform that the Board of Directors of the Bank at its meeting held today has approved the raising of funds by issue of equity shares and convertible warrants on a preferential basis,” Axis Bank said in filing on the stock exchanges.
— Issue Price Of Equity Shares At Rs 525/share
— Issue Price Of Convertible Warrants At Rs 565/Share
— Axis Bank Board Approves Raising Up To Rs 11,625 Cr Via Equity & Warrant Issue
— Fund Raising Involves Sale Of 9% Stake
— Investors Include Bain Capital Asia Investment, Integral Investment South Asia New World Fund, Capital Group New World Fund, American Funds Insurance and EuroPacific Growth Fund
— LIC To Also Be Issued Equity Shares On Preferential Basis
— Axis Bank Board To Convene EGM To Get Shareholder Nod For Preferential Allotment Via Special Resolution
BC Asia Growth Investments, the investment entities of Bain Capital will be investing along with seven other investors including Integral Investments South Asia, New World Fund, Capital Group New World Fund.
Shikha Sharma, MD and CEO, Axis Bank said, “We are honoured by the faith reposed by marquee investors including Bain Capital and our Promoters LIC in the long term strategy of the Bank. We are excited about the opportunities this growth capital creates for us.”
Sanjiv Misra, Chairman, Axis Bank said, “Banking in India is at an inflection point right now. The credit growth trajectory in the country is turning. Axis is well positioned to participate in this development. This significant capitalisation of Axis Bank, and the interest shown by marquee investors, positions us for even greater strength.”
The capital raised will bolster the capital adequacy ratio (CAR), thereby providing growth capital for the core business of the Bank and its subsidiaries. The CAR of the bank stands at 16.32 percent as on September end.
Once approved, this would be one of the largest private equity investments in the Indian banking sector.
The Bank proposes to issue 172,630,639 or 17.26 crore equity shares on preferential basis at a price of Rs 525 per share (at a premium of 2.4 percent to the SEBI Floor Price as of the relevant date), and 45,357,385 or 4.53 crore warrants convertible into equity shares at a price of Rs 565 per share (at a premium of 10.2 percent to the SEBI Floor Price as of the relevant date), adding Rs 43.6 Crores in the paid up capital of the Bank.
This would entail a dilution of 8.23 percent for existing shareholders, the bank said.
At present, the promoters (Specified Undertaking of Unit Trust of India, or SUUTI) own 30.35 percent while foreign portfolio investors, including the Government of Singapore Investment Corp and Abu Dhabi Investment Authority, hold 49.13 percent. Foreign investors can automatically own up to 5 percent in a bank in India, which with RBI approval can go up to 10 percent.
Last month, it was reported that Axis Bank, which is country’s third-largest private sector bank, was in advanced talks with private equity player Bain capital, amidst worsening asset quality and regulatory glare.
Axis Bank performance
In its financial results in October, Axis Bank reported worse than expected performance on bad loans for the fiscal second quarter July-September, with fresh corporate slippages at Rs 8,110 crore. Gross NPAs in absolute terms were at Rs 27,402 crore rising 3.12% from 2.02% in the same quarter a year ago. Provisions in the quarter were at Rs 3,886 crore.
Axis Bank was advised exclusively by Axis Capital Ltd and Bain Capital was advised exclusively by JP Morgan on this transaction. Legal advisors to Axis Bank were Shardul Amarchand Mangaldas and Bain Capital was advised by AZB & Partners.
Stephen Pagliuca, Co-Chairman of Bain Capital, said “In India's banking industry we believe reach, scale and analytics driven underwriting will become increasingly important. Axis Bank's leadership team, led by Shikha Sharma, is very well positioned to take advantage of the same, in what promises to be an exciting growth phase for private sector banks in the country. We are particularly excited about Axis Bank's strong and differentiated retail franchise that we believe will be an important driver of future growth.”