Axis Bank rallied 4.3 per cent to close at Rs 1,475.90 on the BSE following the bank fund’s raising drive launched on Monday through QIP and preferential allotment. The stock witnessed a total traded quantity of 13.75 lakh shares on Tuesday against the two-week average of 2.48 lakh shares.
Axis Bank plans to raise Rs 5,546 crore through issue of 39 million shares to institutional investors.
QIP, preferential issues
The bank’s QIP issue size is for Rs 4,726 crore which involves a dilution of 34 million shares. It will also allot 5 million shares aggregating Rs 820 crore on preferential basis to LIC, among other promoters. The offer price is at Rs 1,390 an equity share. Analysts said that issuance of capital would help the bank boost lending and improve profitability and this coupled with the backdrop of the stock being a fundamentally ‘value buy’ would be a positive trigger for the stock.
Vaibhav Aggarwal of Angel Broking, said: “Today the stock closed higher owing to the sentimental impact of the bank’s fund raising drive. Notwithstanding this, the stock has been trading cheap for some time and we have had a ‘buy’ call on it on the basis of good earnings growth and sound fundamentals.”
On the impact of the increased funds at the company’s disposal, Aggarwal added: “In the long term, banks will have to raise capital under Basel III and private banks such as Axis Bank would be able to raise it cheaply in terms of cheaper dilutions.
“Moreover, given the edge that private banks have over public banks in terms of better capital adequacy they would try and gain more market share compared with PSU banks.”