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Axis Bank in Rs 2,000-cr deal for Enam arm

The exchange ratio for the deal was fixed at 5.7 shares of Axis Bank, for every one share of Enam Securities, resulting in about 3.3 per cent equity stake for Enam's promoters in the Bank.

B. S. Srinivasalu Reddy | November 24, 2010 | Updated 10:21 IST

Leading private sector lender, Axis Bank, is set to acquire the operations of Enam Securities, including its investment banking and broking businesses, for a consideration of Rs 2,064 crore.

The exchange ratio for the deal was fixed at 5.7 shares of Axis Bank for every one share of Enam Securities, resulting in about 3.3 per cent equity stake for Enam's promoters in the enlarged capital of Axis Bank.

According to the scheme of arrangement, Enam Securities will demerge its investment banking, institutional equities, retail equities and related businesses, such as distribution of financial products and NBFC, to a wholly owned subsidiary of Axis Bank, while Axis Bank will also demerge its investment banking business into the wholly owned subsidiary, managements of both the companies told the press.

"The strategic objective is to create a complete bouquet of financial products and services for corporate, institutional and individual clients that will enhance the ability of the combined entity to better serve client needs in a seamless manner across product categories and geographies," Shikha Sharma, chief executive and managing director of the bank said on Wednesday.

"We believe there are significant synergies, negligible overlaps and a strong cultural fit between the two organisations," Sharma added.

Sharma, who has been appointed as the chief executive officer (CEO) of Axis Bank in April 2009, is seeking to add clients for the advisory business after public offerings rose to record peaks in 2010, even beating the earlier record year of 2007.

Axis Bank has a distribution platform of almost 1,100 branches, while Enam has a retail network in 12 cities and towns, giving the combined entity an unparalleled opportunity to build a dominant retail franchise.

However, they agreed to allow Enam and Axis Bank to continue their respective " buy side" and investment management businesses separately.

"These do not form part of this transaction," they said.

Vallabh Bhansali, the cofounder and chairman of Enam, would be inducted as an independent director of the bank.

Manish Chokhani would be the managing director (MD) and CEO of the newly-formed entity, while Jagdish Master, another co-founder, would continue to provide guidance as a board member of the wholly owned subsidiary.

The Mumbai-based Enam Securities was founded in 1984 by Manek Bhanshali, Nemish Shah, Vallabh Bhanshali and Jagdish Master.

Vallabh Bhansali said: "In Axis Bank, we found the perfect fit and have chose this path in order to provide greater value to our clients and greater opportunity of growth for our employees."

Enam is one of the leading investment banking and securities firms in India with 450 employees and offices in 12 cities. Enam Investment Banking is a leader in the Indian equity capital markets and has been a lead manager (by value) to approximately 50 per cent of all new public offerings of equity in India over the last decade, it claimed.

Axis Bank is the third largest private bank in India.

Shares of Axis fell 3.5 per cent to Rs 1,469.15 on Tuesday, taking its total gains during 2010 to 49 per cent, compared to barely 14 per cent rise in the BSE Sensex.

Macquarie Group Ltd advised Axis on the transaction, while Anil Singhvi advised Enam.

Courtesy: Mail Today

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