Axis Bank shares drop 2% amid block deal buzz

Shares of Axis Bank were under stress on Wednesday morning amid a report that U.S.-based private equity firm Bain Capital is again planning to sell a stake in the private sector lender via a block deal. Bain Capital, which acquired a stake in Axis Bank in November 2017, is looking to sell another 1.1% stake worth $444 million (₹3,697 crore) at a floor price of ₹1,109 per share, as per the report. The floor price is a discount of 1.95% to the lender’s Tuesday closing price of ₹1,131 per share.

If the deal proceeds, this would be the second time in the current year that the private equity firm is offloading its stake in Axis Bank. In June, Bain sold 0.7% shares in Axis Bank for ₹2,178 crore, paring another 1.2% stake in October 2022.

In November 2017, Bain Capital invested ₹6,854 crore in the bank. At the end of the September quarter of 2023, the investment firm owned 4.24% shares in Axis Bank through three entities - BC Asia Investments VII, BC Asia Investments III, and Integral Investments South Asia IV - under the foreign direct investment (FDI) category.

On Wednesday, Axis Bank shares opened higher at ₹1,144.05 against the previous closing price of ₹1,131.10 on the BSE. The stock rose as much as 1.7% to hit a high of ₹1,150 in early deals, but it soon slipped into negative terrain. The banking heavyweight declined as much as 3.3% from day’s high to ₹1,150 mark, which was down 1.7% from yesterday’s closing price. On the volume front, 1.5 lakh shares changed hands over the counter on the BSE against two-week average volume of 3.73 lakh stocks.

Axis Bank shares hit a 52-week high of ₹1,151.50 on December 5, 2023, while it touched a 52-week low of ₹814.25 on March 16, 2023. The market capitalisation of the banking major stood at ₹3.43 lakh crore.

Last month, CRISIL assigned ‘AAA’ rating on ₹5,000 crore Infrastructure bonds of Axis Bank, while ratings on other debt instruments reaffirmed at ‘AAA’, ‘AA+’, and ‘A1+', with ‘Stable’ outlook. The agency also withdrew its rating of ₹5000 crore infrastructure bond, saying that it received independent confirmation that these instruments are fully redeemed.

“The overall ratings continue to reflect the bank's strong capitalisation and strong market position and its comfortable resource profile. These strengths are partly tempered by the average asset quality,” CRISIL says in a report released on November 22, 2023.

The agency, however, added that the recent regulation by Reserve Bank of India (RBI) on revised risk weights on unsecured consumer loans, including credit card receivables and loans to non-banking financial companies (NBFCs) beyond a specific threshold, is expected to have an impact on the capital ratios of the bank, adding that capitalisation levels will remain “comfortable”. 

Axis Bank is amongst the top three private sector banks, with a market share of around 6% and 4.8% in advances and deposits, respectively. The bank’s overall asset quality remains average, although it is on improving trend over the last few quarters and GNPA stood at 1.73% as on September 30, 2023. The improving trend is driven by controlled slippages coupled with steady upgradations and recoveries (Upgradations and recoveries of ₹4,290 crore for half year ended fiscal 2024 as against ₹5,783 crore for previous fiscal). However, over the near-to-medium term, the asset quality will remain monitorable, says CRISIL.

For Q2 FY24, the bank posted a consolidated net profit of ₹5,625 crore, up 66% for the quarter ended September 2022, compared to ₹3,383 crore in the same period last year. The net interest income (NII) grew 31% year-on-year to ₹10,360 crore, while the net interest margin (NIM) stood at 3.96%.On the asset quality front, the gross non-performing asset (GNPA) ratio of the bank declined to 2.50%, from 3.53% in Q2 FY22 and 2.76% in the June quarter of the current fiscal (Q1 FY23). Net non-performing assets (NNPA) as a percentage of net advances more than halved to 0.51% in Q2FY23, as against 1.08% in the same period last year.

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