The government on Thursday kicked off the process of selling nearly half of its 20.7 per cent stake in Axis Bank held via the Specified Undertaking of Unit Trust of India (SUUTI). The government plans to sell 4.22 crore shares, representing a stake of 9 per cent, in the country’s third largest private sector lender on Friday, valuing the deal at Rs 5,443-5,726 crore ($892-$938 million based on the current exchange rate).
The price band has been set at Rs 1,290-1,357.35 per share and institutional investors can bid till 10.30 PM on Thursday. The bids are to be executed on Friday via the block trading facility available on stock exchanges.
Axis Bank scrip ended at Rs 1,356.85 on the BSE Thursday, down Rs 29.30, or 2.11 per cent, from the previous close. The stock has touched a high of Rs 1,549 and a low of Rs 764 in the last one year. Sources said the share auction may see strong participation from domestic institutional investors such as insurance companies and private equity firms, as the ownership of foreign institutional investors is very close to the 49 per cent-limit.
“The auction process is pre-arranged. We foresee widespread participation but expect domestic institutions like insurance companies and private institutions to be the frontrunners in the share sale,” said an investment banker on condition of anonymity.
In December 2013, the Cabinet Committee on Economic Affairs approved raising foreign investment limit in Axis Bank to 62 per cent from 49 per cent, subject to the aggregate FIIs holding not exceeding 49 per cent of the paid-up equity.
Foreign institutional investors hold 43.18 per cent in the lender as on quarter ending December 2013, stock exchange data showed.
Analysts have a positive view on Axis Bank, citing valuation comfort and a strong Q3FY14 performance. The bank achieved a 19 per cent year-on-year growth in net profit and posted a net interest margin of 3.71 per cent, up 14 basis points from the corresponding period last year. Gross NPA stood at 1.25 per cent of total advances.
“The bank continues to do well on the liability side while the focus to shift to retail can help cushion the impact of a sharp deterioration in the infrastructure portfolio,” Kotak Institutional Equities wrote in a recent report. FE