Axis Bank, the third largest private sector lender, will raise equity capital by issuing up to 45.8 million fresh shares which will dilute its present equity base by 11 per cent. At the current market price, the lender can raise up to Rs 6,800 crore.
In a filing to the exchanges, the lender said its board had approved fund raising of tier-I capital through global depository receipts (GDR) or a qualified institutional placement (QIP), with preferential issue to the promoters of the bank.
The board has also approved increasing the authorised share capital from Rs 500 crore to Rs 850 crore. The approval is valid for a year.
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Though the bank has not given any time frame, analysts said the issue was expected only in the next financial year. This will be the first time since 2009 when the private sector lender will raise equity capital.
The equity infusion will boost the bank’s tier-I capital, 9.92 per cent (including net profit for the first half of the current financial year) as on September-end, while the overall capital adequacy ratio is 13.92 per cent, as compared with the regulatory requirement of nine per cent.
“The fund raising exercise, at the current market price, if it happens, is likely to enhance Axis Bank’s tier-I capital by 255-260 bps,” said Saday Sinha, vice-president, equities, Kotak Securities.
According to analysts, the bank will use the funds to support business growth and to meet the Basel-III norms. The bank has seen credit growth of 23 per cent till September, higher than the sectoral growth of around 17 per cent. The bank has aggressively grown its retail portfolio, which registered growth of 51 per cent.
According to the Reserve Bank of India’s estimates, to achieve full Basel-III implementation by end-March 2018, major private sector banks would require common equity of Rs 20,000 crore to Rs 25,000 crore on top of internal accruals, in addition to Rs 50,000 crore to Rs 60,000 crore in the form of non-equity capital.
“These projections are based on the conservative assumption of uniform growth in risk-weighted assets of 20 per cent per annum individually for all banks and individual banks’ assessment of internal accrual (in the range of 1.0-1.2 per cent of risk-weighted assets),” the central bank had said.
In a recent interview to Business Standard, Axis Bank’s managing director and chief executive officer, Shikha Sharma, had said contribution of retail loans to the bank’s book would increase to 30 per cent by 2015 from 26 per cent now. In September 2009, Axis Bank had raised Rs 3,500 crore through a mix of GDR and QIP and about Rs 400 crore from its promoters. Among the promoters, only Life Insurance Corporation of India has subscribed to the preferential issue.
The shares closed at Rs 1,355 at the Bombay Stock Exchange on Monday, up 0.2 per cent up from its previous close while the Sensex closed 0.4 per cent lower.
