Private equity player Bain Capital in talks to up stake in Axis Bank

In 2017, the lender had approved and conducted a sale of 9 per cent stake to raise Rs 11,626 crore, in a round led by Bain Capital.

Private equity (PE) player Bain Capital has held preliminary talks with Axis Bank to invest in a possible fresh issuance of shares by the bank. US-based Bain holds a 4.6 per cent stake in the lender.

However, it did not participate in the bank’s fund raising efforts last year, through which the lender raised $1.76 billion by selling shares to institutional investors including Singapore’s sovereign fund GIC. Before that, Bain’s shareholding stood at 5 per cent.

In 2017, the lender had approved and conducted a sale of 9 per cent stake to raise Rs 11,626 crore, in a round led by Bain Capital. The PE fund invested Rs 6,854 crore and deal was concluded at Rs 525 a share, while the issue price of the convertible warrants stood at Rs 565.

A spokesperson for Bain Capital declined to comment. An Axis Bank spokesperson said: “We do not comment on market speculation”.

Shares of the bank, which had been a laggard for a while, got a big boost with reports that the lender was in talks with Carlyle, which could pick up 5-8 per cent through primary issuance of shares.

The news lifted the bank’s stock by over 15 per cent in a day. However, it fell 2.38 per cent to close at Rs 381.65 on Friday. The bank has also seen substantial erosion in its market cap this year. It has nearly halved from Rs 2.12 trillion as on December 31 to only Rs 1.1 trillion on May 28.

During the same period, other leading banks also saw an erosion in their m-cap, albeit at a much slower rate, such as HDFC Bank (down 25 per cent) and ICICI Bank (down 39 per cent).

Friday’s closing price of Axis Bank was about 27 per cent lower than the price at what Bain had bought its equity stake in 2017. The PE firm, which had raised money partly through debt, had to offer additional guarantees to lenders because the share price fell during the market meltdown.

PE funds can pick up to 5 per cent in a bank under the automatic route, but could go up to 10 per cent with permission from the Reserve Bank of India, according to rules.

While Axis Bank promoters have 16.35 per cent stake, foreign portfolio investors have 45.49 per cent stake in the lender, and MFs control 20.51 per cent.

The bank started looking to raise funds after its asset portfolio, which comprised Anil Ambani group firms and Subhash Chandra’s Essel group, came under serious pressure.