Axis Bank is reevaluating its plans to sell a stake in its non-banking subsidiary Axis Finance due to uncertainty surrounding the Reserve Bank of India’s (RBI) upcoming “forms of business” circular. Potential investors have expressed interest in the transaction but are seeking regulatory clarity before making valuations. The bank had previously committed to the RBI that it would not infuse additional capital into Axis Finance and was exploring a strategic sale to private equity investors, with a potential initial public offering (IPO) at a later stage.
The RBI’s draft guidelines, issued last October, have restricted bank subsidiaries from undertaking core lending activities and discouraged duplication of businesses between banks and their non-banking financial company (NBFC) arms. This has weighed on valuations of bank subsidiaries, including Axis Finance. The company offers products such as gold loans, loans against property, and two-wheeler loans, which are also offered by Axis Bank.
In July, global private equity giants, including Blackstone, Advent, EQT, and Kedaara, expressed interest in acquiring a 20% stake in Axis Finance. However, the sector has seen valuation headwinds, with HDB Financial Services recently listing at a steep discount of nearly 40% lower than its price in the unlisted market. Axis Bank’s CEO, Amitabh Chaudhry, had stated that the bank is committed to raising capital for Axis Finance, which will need a couple of thousand crores over the next few years.
The RBI’s “forms of business” circular is expected to be finalized soon, according to RBI Governor Sanjay Malhotra. The circular’s clarity will be crucial in determining the valuation of Axis Finance and the potential sale of a stake in the company. Axis Bank is waiting for greater clarity on the circular before proceeding with the transaction. The bank’s commitment to the RBI and the need for regulatory clarity have made it challenging for potential investors to firm up valuations, leading to a reassessment of the plans to sell a stake in Axis Finance.
As a trusted news source, it is essential to stay updated on the developments surrounding Axis Bank and Axis Finance. The company’s plans to raise capital and the potential sale of a stake in the subsidiary will be closely watched by investors and industry experts. The RBI’s “forms of business” circular will play a crucial role in determining the fate of Axis Finance and the broader banking sector.