Axis Bank to raise Rs 15,000 crore via share sale

Mumbai: Axis Bank, India’s fourth-biggest private lender by market value, said on Thursday it would raise about Rs 15,000 crore through a share sale that could shore up its core capital ratios by 200 basis points. ET reported in its July 2 edition that the lender was in talks with several private equity players to raise substantial funds in institutional placements.

“The board at its meeting held today (Thursday) has approved the proposal relating to raising of funds not exceeding Rs 15,000 crore through the issue of equity shares, depository receipts or any other equity instrument,” the bank said in an exchange filing.

The bank will also seek shareholder approval for this fundraising plan at its upcoming annual general meeting.

“We don’t know how the asset quality picture will change once the real effect of the pandemic is known. So, the bank decided it was only prudent to build capital buffers so that we are prepared to absorb any asset quality shocks,” a senior official at the bank said. “This is what other banks are also doing, and we felt that it’s better to raise capital now than to wait for the total incoming stress.”

The bank’s shares slipped over 2 per cent to end the day’s trade at Rs 423.5 on the BSE.

At the end of April, the bank’s chief executive Amitabh Chaudhry had sounded a cautious note.

“The nationwide lockdown and the resultant economic slowdown is widespread and will take time to normalise,” he had said in April. “We expect the fee income growth to slow and provisions to increase materially. The Covid-induced slowdown will delay the normalisation of our corporate stressed pool and we expect further downgrades into our below-investment grade pool in FY21.”

The bank had last raised Rs 12,500 crore through a qualified institutional placement (QIP) to fund business growth in September 2019. Its total capital adequacy ratio stood at 17.53 per cent, out of which core tier-1 capital was at 13.34 per cent at the end of March 2020. Axis Bank’s stressed asset watch list was at Rs 6,528 crore during the same period.

Most top Indian banks have announced plans to raise capital to build a Covid-19 war chest and prepare for the onslaught of non-performing loans that could rise to as much as 11.5 per cent of the total advances at the end of this year. Bad loans were at 9 per cent levels at the end of FY20.

Private lender Kotak Mahindra Bank last month raised Rs 7,442 crore via a QIP issue. Its peer ICICI Bank sold stake in its insurance ventures ICICI Prudential and ICICI Lombard to raise a total of Rs 3,090 crore. According to a recent Bloomberg report, it also plans to separately raise $3 billion through an equity sale. HDFC Bank also recently sought shareholder approval to raise Rs 50,000 crore through debt instruments.