Moneycontrol
Nov 13, 2017 03:10 PM IST | Source: Moneycontrol.com

Axis Bank falls over 1 percent after 3% morning gain; brokerages upbeat on capital raising

The bank decided to sell 9 percent stake 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.

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Likely profit booking dragged the stock of Axis Bank lower by over 1 percent intraday after it gained over 3.5 percent intraday on Monday.

Investors initially cheered the development of 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, 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.

Brokerage: Deutsche Bank | Rating: Buy | Target: Hiked to Rs 620

The brokerage house said that big capital raise has boosted confidence. Further, it said that FY18 earnings will be diluted by 4%; Book value per share to increase by 9%/8% for FY18/19.

Brokerage: CLSA | Rating: Buy | Target: Hiked to Rs 650

The brokerage house said that fund raising to absorb credit costs and aid growth. Further, issuance will cause equity dilution of 9%, lift FY19 net worth by 18%, tier I CAR by 180 bps and adjusted book value per share by 15%. Going forward, normalisation of asset quality and lift to capital base should ease concerns and it expects credit costs to normalise from FY19 onwards and resolution of NPLs can abate concerns.

Brokerage: Edelweiss Sec | Rating: Hold | Target: Raised to Rs 589

The brokerage said that overall recovery momentum is likely to be arduous and believes that the capital will be a boost.
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