Axis Bank Case Study Solution

Axis Bank, the third largest private sector lender in India, acquired the equities and investment banking businesses of financial services firm Enam Securities Pvt Ltd in an all-stock deal valued at Rs 1396 Crore in October 2012. Enam’s asset management company and insurance broking unit were however not part of the deal.

The deal was to create one of the India’s leading financial services company combining investment banking and equities franchise of Enam Securities with the dominant debt capital markets and commercial banking franchise of Axis Bank.

THE DEAL

 Date of announcement: 19th October, 2012

 Valuation: ₹ 1396 Crore

 Payment: All stock deal. o Enam shareholders will receive Axis Bank shares in the ratio of 5 shares for every 1

LATER

After a delay of over two years, the deal was finally finalized on 19th October, 2012. The original structures of the deal went through changes due to concerns raised by the banking regulator.

The Axis Bank cut the valuation of the transaction by almost one-third of the original deal size to Rs 1396 Crore in view of the then prevailing market conditions.

Axis Bank launched a new subsidiary company named Axis Capital Ltd, which housed the investment banking and institutional equities businesses. Manish Chokhani was made Managing Director and Chief Executive Officer of the proposed entity, while Jagdish Master, Enam co-founder, continued to provide guidance, as a board member of the wholly-owned subsidiary. As RBI objected Bhansali’s seat in Board of Axis Bank, it was cancelled and he was made a part of the “Advisory Board” of the new company. Bhansali was also not a part of the Board of the Axis Capital.

The Board was chaired by bank CEO and MD, Shikha Sharma.

THE DELAY

Though it was not planned yet it proved beneficial for both the entities. It helped them to put all the nuts and bolts together and gave them some time to get to know each other better. Also there was a lull in the market during 2010-12 due to the 2008 global economic crisis. Later, the economy gained

THE STRATEGY

The strategic objective of Axis Bank was to create a complete bouquet of financial products and services for corporate, institutional and individual clients, so that it becomes one stop solution.

Also to position itself strongly against bigger players like ICICI, SBI, etc.

Though Axis Bank covered 1500 companies, offering them banking and debt market services but they did not offer investment banking services. They had a very dominant position in the fixed-income business but on the equities they didn’t have any presence. They bridged this gap by acquiring Enam. They enhanced the ability of the combined entity to better serve client needs in a smooth manner across product categories.

Enam Securities had 150 to 200 clients, mainly in investment banking business. Axis Capital planned to target services to 50 of the top 100 companies in India and contribute 25% of the bank’s fee income, non-interest income, in the next three years.

With Axis Bank’s distribution platform of almost 1,100 branches and Enam’s retail network, the combined entity also gained an unparalleled opportunity to build a dominant retail franchise.

It was a win-win situation for both as Enam’s strong M&A team brought in large deals on the