Enam Securities has said it is hopeful of its sale to Axis Bank — pending for the last 16 months — going through before the end of the fiscal.
“We have the Reserve Bank’s mandate for the sale. It is stuck in some procedural issues,” Enam Securities co-founder and chairman Vallabh Bhanshali told PTI here.
Asked whether the deal would materialise within this fiscal, Mr Bhanshali, who was speaking on the sidelines of a FICCI function here over the weekend, said, “I hope so”.
On November 17, 2010, Mr Bhanshali, a master deal-maker, struck a deal with India’s third largest private lender Axis Bank to sell his brokerage and investment banking businesses for a whopping Rs 2,067 crore in an all—stock deal, while retaining asset management and portfolio management businesses of Enam.
But the deal did not find favour with RBI and in July 2011 it had reportedly asked the parties, especially Axis, to rework the terms.
The central bank rejected the proposal over tax liability issues, apart from the valuation and share exchange structure.
Because of some bad experiences, the RBI does not encourage banks to run stock broking as a department, it prefers the banks to open subsidiaries for that.
The Reserve Bank of India’s discomfort with the deal was about the fact that Axis’s brokerage subsidiary Axis Securities & Sales would buy Enam, but the bank would be paying for it with its own shares. Under the initial proposal, the investment banking and equity capital markets businesses would be merged with a wholly owned arm of the bank.
The RBI was also not comfortable with the all-stock deal and reportedly favoured an all-cash deal.
The all-stock deal sought to give 5.7 shares of Axis Bank in exchange for a share in the unlisted Enam. The deal also offered a board position for Mr Bhanshali at Axis.
According to analysts, the deal would be a win-win for both as Enam’s strong M&A team could bring in large deals on the Axis table, while the bank, with a strong balancesheet, could back such deals to earn good fee income, apart from using Enam’s expertise in distributing public offers through its over 1,100 branches.