The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved the proposal of Axis Bank limited, allowing the bank to increase foreign investments in it.
“The CCEA has approved the proposal of M/s. Axis Bank limited for increase in foreign investment from 49 percent to 62 percent subject to the aggregate foreign institutional investors (FII) holding not exceeding 49 percent of the paid up equity share capital of the bank,” Government said in its official statement on Thursday.
What this simply implies is that FIIs can hold up to 49 per cent of shares in the bank while the remaining 13 per cent has to come in form of foreign direct investments (FDI).
“The approval would result in foreign investment of `7,250 crore (approximately) in the country,” the Government further added in the statement.
The bank’s stock ended the day at `1,298.2, up 1.21 per cent on the BSE. In intra-day trade, the scrip gained 2.79 per cent to `1,318.45. At the NSE, the stock settled 1.33 per cent higher at `1,300.
Axis Bank, the third largest private lender in the country, sought the raising of foreign equity limit when the Reserve Bank of India banned fresh purchases by foreign investors after bank’s foreign stake breached the sanctioned limit of 49 per cent.
Earlier, Foreign Investment Promotion Board (FIPB) had referred Axis Bank’s proposal involving `6,265.76 crore to the CCEA. Since the amount of investment was exceeding `1,200 crore , proposal had to be cleared by the CCEA.
As per the Axis Bank’s filings to the Bombay Stock Exchange (BSE), as on September 30, FIIs held 43.37 per cent stake and FDIs held 4.54 per cent in form of global depository receipts (GDR). After the hike in foreign investors, the bank will become foreign-owned and thus would fall under the Government’s FDI policy.
As per the current FDI policy, foreign shareholding in private sector banks is allowed up to a ceiling of 74 per cent of the paid-up voting equity capital.
Commenting from where the proposed foreign investment would come from, Kunal Saraogi from Equity Rush said, “Currently, it is very unclear as to who would be investing the money in the bank but after the approval from the CCEA, we expect to see FII investment along with FDI investment through GDR route to increase. We think, rather than just one individual or company, group of investors could come together and invest in the bank.”
Currently, Unit Trust of India (UTI) holds 20.72 per cent stake, the biggest share among the bank’s promoter group. Along with UTI, promoters also include, life Insurance Corporation of India, General Insurance Corporation of India, New India Assurance Company limited, Oriental Insurance Company limited and United India Insurance Company limited holds 9.33 per cent, 1.70 per cent, 0.88 per cent, 0.74 per cent, 0.28 per cent and 0.29 per cent respectively.
Axis Bank as on March 31, 2013, has 1,947 domestic branches and 11,245 ATMs spread across the country.
As far as overseas operations are concerned, the bank has branches in Singapore, Hong Kong, Dubai International Financial Centre (DIFC) and Colombo, as well as representative offices in Shanghai, Dubai and Abu Dhabi. The Bank has six subsidiaries in country including Axis Capitals, Axis Finance Pvt ltd, Axis Private Equity ltd, Axis Trustee Services ltd, Axis Asset Management Company, Axis Mutual Fund Trustee ltd. Along with, it also has a subsidiary in the United Kingdom called Axis UK limited.