Axis Bank, one of the largest private sector lenders, may tap the market to raise funds through a qualified institutional placement (QIP) in the coming weeks, said two people familiar with the matter.
The bank may look to raise ₹10,000 crore or more via this mode, and a decision to this effect may be taken in the board meeting ahead of the second quarter results. The investment bankers will be appointed after the board resolution is passed.
“The approval will be for a larger amount. The final amount to be raised will be decided based on the feedback received during roadshows,” said a banker.
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An e-mail sent to Axis Bank did not get a response. Earlier this year, the bank completed the acquisition of Citibank India’s consumer business, including its credit cards, deposits, wealth management, loans, and other retail banking operations. It also acquired the NBFC business of Citicorp Finance (India), paying a total of ₹11,603 crore for the deals.
In an interaction with businessline in September last year, the bank’s MD and CEO, Amitabh Chaudhry, had said that the acquisition would impact the capital ratios of the bank, and may prompt a capital raise large enough to neutralise the impact of the acquisition on the bank’s core capital and take care of growth requirements.
The last time the bank tapped the market for a QIP was in August 2020 when it raised ₹10,000 crore. The QIP issuance was done at a price of ₹420.1 per equity share and was oversubscribed. The aim was to raise funds to enhance its capital adequacy, address risks emanating from the Covid-19 pandemic and for general corporate purposes.
The bank has reported steady traction in retail business with the mix increasing to 58 per cent in 1QFY24 from 50 per cent in FY19. An improving liability franchise has helped the bank maintain strong control on its funding cost, according to a report by Motilal Oswal Financial Services (MOFSL).
Asset quality has improved significantly over the past few years, with slippages moderating to 1.9 per cent in FY23 versus 8.2 per cent in FY18. The bank continues to invest in digital initiatives, sourcing 55 per cent of personal loans digitally in FY23 versus 22 per cent in FY18.
“Axis Bank remains focussed on building a stronger, consistent, and sustainable franchise. With asset quality issues behind, slippages and credit costs are likely to stay under control. The rise in deposit cost will continue to exert pressure on margins. However, the focus on retail liabilities, improving mix of high-yielding loans and a gradual reduction in low-yielding RIDF bonds (2.3 per cent of assets) should limit margin decline,” said the MOFSL note.
The bank clocked a net profit of ₹5,797 crore for the quarter ended June, 40 per cent higher than the same period the previous year.
Shares of Axis Bank traded flat on Tuesday, closing at ₹1038.5 apiece. The stock is up 10.3 per cent in the year to date.
Bank denies the report
In an exchange filing on Wednesday, Axis Bank said that talks of the bank tapping the market for a QIP in the coming weeks is speculative and factually incorrect.