Axis Bank fundraising meeting on April 24: Equity supply risk an overhang for share price, says Nomura

While announcing quarterly results, the Axis Bank board will met on Wednesday, April 24, to evaluate a potential equity capital raise via QIP, ADR issuance or/and preferential allotment ‘at an appropriate time’. Nomura India said a potential fundraising by Axis Bank would come in as a surprise, given its management had in its November 2023 analyst meet cited no intent to raise capital any time soon.  

"An equity supply risk could be a near-term overhang for share price performance, especially considering that the stock has already seen significant recent equity supply from recent block deals (Dec’23 and Apr’24)," Nomura India said.

That said, the foreign brokerage said the approval sought at the board meeting may just be an enabling provision, which is a procedural approval taken by several banks from their respective boards at the beginning of a new financial year.

"Axis has historically not taken procedural approvals for equity capital raise, though other banks have been known to do this. We await clarity on this along with the results on April 24," it said.

Nomura India said while Axis Bank is one of its preferred stock picks, it would watch out for any pressures on its loan growth outlook led by deposit mobilisation pressures, given its elevated LDR of 93 per cent as of Q3FY24 (against 80 per cent for the overall sector). The brokerage has a price target of Rs 1,250 on Axis Bank.

"A large part of this is factored into current valuations in our view – Axis Bank trades at 1.5 times FY26 BVPS vs 1.8 times/2.1 times for HDFC Bank/ICICI Bank, and it has underperformed the broader Bank Nifty index by 6 per cent YTD. We expect Axis Bank to deliver 18 per cen RoE over FY25-26F. Maintain Buy," Nomura said.