Axis Bank to raise Rs 11,600 cr from Bain Capital, LIC

Mumbai-based lender Axis Bank is set to raise Rs 11,626 crore ($1.8 billion) to further strengthen its capital base by selling shares and warrants to a group of investors, including Bain Capital and top Indian insurer Life Insurance Corp (LIC).

The private lender in a filing said its board had approved the sale of up to 172.63 million shares at Rs 525 each, and 45.36 million convertible warrants at Rs 565 each on a preferential basis.

Ahead of the news, Axis Bank’s shares on Friday had closed 0.8 per cent higher at Rs 544.50 on the BSE, compared with a 0.1 per cent gain in the broader market. The stock is up 21 per cent so far in 2017, underperforming a 40 per cent rise in the banking sector index and a 26 per cent gain in the main market index. The fundraising “will bolster the capital adequacy of the bank, thereby providing growth capital for the core business … and its subsidiaries”, the bank stated on Friday, after securing its board’s approval for the deal.

graphThe capital-raising comes after the lender, India’s third-biggest among the private sector ones and seventh-biggest overall by assets, saw its bad loans surge in the second quarter to September 30 after the Reserve Bank of India’s audit.

While the 21 state-run lenders account for bulk of India’s record $146 billion soured loans, some of the private sector lenders have also seen defaults rising in the recent quarters.

graph Despite the rise in bad loans, Axis Bank’s capital adequacy ratio stood at 16.32 per cent of assets at the end of September.

The bank will raise Rs 9,063 crore from the share sale and Rs 2,563 crore from the sale of warrants.

Affiliates of Bain Capital will invest Rs 6,854 crore in the bank, while LIC, which is owned by the Indian government and already owns a stake in Axis Bank, will invest Rs 1,583 crore.

The bank will put the fund-raising plan to a shareholders’ vote on December 8, it said.

Axis Bank’s investment banking arm Axis Capital advised it on the deal, while JP Morgan advised Bain Capital.