India's third largest private lender, Axis Bank has formally initiated the process to hive off its non-bank lending subsidiary - Axis Finance - and has held talks with financial investors including Carlyle and Advent International for a transaction offering control of the NBFC, people familiar with the development told Moneycontrol.
“Axis Bank is looking at offloading a minimum of 50 percent stake in Axis Finance,” said a person aware of talks with a few private equity players, adding that initial discussions with Carlyle and Advent International have taken place.
Emails sent to Axis Bank and Carlyle seeking comment remained unanswered till publishing the article. An official spokesperson of Advent International replied on email, “We decline to comment on this.”
Morgan Stanley - hired by Axis Bank to run the sale process - has been approaching financial investors, mainly foreign private equity players for a deal. Sources say Temasek too has been approached for a deal, through the Singapore-based PE firm did not want to comment on the matter.
“If valuations are attractive, the bank may consider a full exit from the business also,” said an investment banker aware of the deal talks.
Axis Bank is aiming at a valuation of $1.2-1.4 billion (Rs 10,000–12,000 crore) for Axis Finance, its wholly-owned subsidiary. On a projected FY25 net worth of Rs 5,200 crore, the valuation works out to be little over 2x the Price to Book multiple.
Talks are still at initial stages and a deal could take 6–9 months to fructify, said one of the sources cited above. Plans by Axis Bank to induct investors in its NBFC unit was first reported by Bloomberg on February 25.
Deal Rationale
Axis Bank's MD and CEO Amitabh Chaudhry, who is into his third tenure with the bank, had told Moneycontrol in an interview on January 3, 2025 that it was too early to speculate the fate of Axis Finance. “We have been infusing equity into Axis Finance consistently. The RBI has been telling us that they would not like us to continue putting money into this subsidiary,” he said, adding that at some stage the regulator would want the bank to dilute its stake in the NBFC.
A draft circular issued by the Reserve Bank of India in October last year was not in favour of banks holding investment in non-banking finance businesses.
In the recent years, between FY22 and FY24, Axis Bank has infused Rs 1,100 crore into Axis Finance. As recently as is November 2024, the lender invested Rs 598 crore into the NBFC. The bank has also been supporting the subsidiary through funding lines for its business.
“Under such circumstances, irrespective of the outcome of RBI’s circular on ownership in subsidiaries, Axis Bank has decided to pare stake, or even fully exit from Axis Finance,” said a person aware of the matter.
It was earlier decided that Axis Bank will look to list its non-bank arm. “After having seen the experience of HDFC Bank with HDB Financial, Axis Bank has opted for M&A route to divest rather than taking the company public,” said an investment banker with knowledge of the deal.
Read More: Axis Bank Q3FY25 - Net profit rises 4% YoY to Rs 6,304 crore, misses estimates
Established in 2010 as Axis Bank’s subsidiary, the Asset Under Management (AUM) of Axis Finance stands at Rs 39,700 crore as on December 31, 2024. Initially set up as a wholesale lender, it was only in 2019 that the company started focusing on retail loans such as loan against property, home loan and personal loan. The entry into to retail was largely to de-risk the NBFC’s loan book, which had become very vulnerable to business risks seven years ago.
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