Axis Bank won't infuse more capital into NBFC; it will tap market
Axis Bank
has committed to the Reserve Bank of India (
RBI
) that the lender will not infuse any new capital into its wholly-owned finance company
Axis Finance
,
Amitabh Chaudhry
, CEO of the private bank, told ET. The NBFC is working on plans to raise ₹3,000 crore through an initial public offering (IPO), he said.
The commitment to the RBI comes in the backdrop of the central bank's draft guidelines issued last October on 'Forms of Business and Prudential Regulation for Investments.' The guidelines say that core lending business should be undertaken by the bank while restricting lenders and their NBFC units from duplicating similar revenue streams.
Products which are offered by Axis Bank such as gold loans, loans against property and two-wheeler loans are also offered by its subsidiary finance company.
"As per its growth plans, Axis Finance will need a couple of thousand crores of capital over the next few years," Chaudhry said. "We are in no position to infuse further capital because that is the commitment we have made to RBI. We have no option but to go to the market and try to raise the capital. We are running a process right now to do that."
Chaudhry added that Axis Finance will be classified as an upper layer NBFC soon and that the bank is evaluating an appropriate timeline for listing or a stake sale. The RBI has directed that those finance companies, with asset books exceeding ₹50,000 crore, be classified as upper layer
NBFCs
and they will have to be listed within a stipulated time frame.
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Axis Finance, too, may face a hurdle if the RBI does not issue final guidelines or clarify its stand of the matter. "All the investors know that this is something which will get finalised over a period of time and it could have some long-term implications," Chaudhry said. "When we are talking to the potential investors, we have been quite clear that we will do what is best for the entity concerned and we do not want to destroy value in any form or shape."
Chaudhry added that while investors want Axis Bank to stay on as the majority investor, the bank is hoping to find a right investor.
"It (RBI draft circular) does have an impact because at the end of the day any amount of uncertainty does mean that the investors will apply some kind of discount," he said.
At the end of FY25, Axis Finance reported a profit after tax of ₹676 crore which was up 11% on year. Asset quality was stable with net NPA at 0.37%. Its total loan book stood at ₹39,079 crore, with wholesale at 50% of the book and retail loans at 47%.
HDB Finance, a subsidiary of HDFC Bank, too, had to go public with an equity issuance mainly because it is classified as an upper layer NBFC. However, the pricing of the initial public offering-at ₹700-₹740 a share-is at more than a 40% discount to the price the stock was traded in the unlisted space.
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