Wells Fargo, Government of Singapore, Vanguard, T Rowe Price, Goldman Sachs, Fidelity and Nomura are among nearly 300 institutional investors that have invested in Axis Bank's Rs 12,500 crore equity offering, which closed for subscription last week.
This is the first big equity raise under the new CEO Amitabh Chaudhry, who is focussed on growth, profitability and sustainability. Chaudhry, who had earlier turned around the HDFC's life insurance business, is targeting a return on equity of 18 per cent by 2021/22 from 8.09 per cent in 2018/19. The new CEO also plans to scale up low-cost deposits or CASA (current account and savings account), retail assets and subsidiaries.
In fact, the current equity offering came close on the heels of Rs 11,242 crore that the bank had raised from private equity investor Bain Capital, LIC and CRMC in November 2017 by way of convertible warrants. The fund infusion from LIC and Bain came when the bank was facing asset quality deterioration and a fall in profitability.
During the same time, speculations were rife about its merger with Kotak Mahindra Bank. Looking into the shareholding pattern, promoters hold the highest share (16.60 per cent) in the Axis Bank. Among them, the state-owned Life Insurance Corporation (LIC) owns the largest stake of 9.44 per cent, while the balance is held by UTI, GIC and four state-owned general insurance companies.
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Under new CEO Chaudhry, the bank looks more stable. It has reported encouraging numbers in 2018/19. The net interest income improved by 17 per cent to Rs 21,708 crore. The net profit jumped from Rs 276 crore to Rs 4,677 crore. The balance sheet size saw growth from Rs 6.91 lakh crore to Rs 8 lakh crore.
The bank needs capital for tapping future growth opportunities in retail and mid-corporate segments. Under the QIP offering, the bank offered 19.87 crore equity shares at a price of Rs 629 per share, which included a share premium of Rs 627 per share. The face value of Axis Bank is Rs 2 per share. The investors got a discount of 4.91 per cent on the floor price of Rs 661.50 per share. The current market cap of the bank is at Rs 1.88 lakh crore.
According to insiders, the response was equally upbeat from domestic institutional investors, especially mutual funds and insurance companies. Some of big domestic asset management companies, which have invested in the QIP include HDFC Mutual Fund, ICICI Prudential, Aditya Birla, SBI MF, Kotak, BNP Paribas and Franklin Templeton.