Contrary to market expectations, the Axis Bank scrip has gained 10.72% since February 17, the day finance minister P Chidambaram announced that the Specified Undertaking of UTI’s (SUUTI) stake in Axis Bank will be sold this fiscal year.
Experts feel the SUUTI stake sale is an overhang for the country’s third largest private lender. “The stake sale would lead to fresh supply of equity shares. Apart from this, there is uncertainty over pricing and buyers,” said Sonam Udasi, head (research), IDBI Capital.
Experts feel the scrip has been gaining on value buying. “The scrip has been trading at a discount to its banking peers. It currently trades at a price-to-earning multiple of 10.21,” an analyst said.
YTD, the scrip has corrected 4.96%. The Axis Bank scrip closed marginally down 0.003% at R1,235.15 on the BSE on Tuesday.
Last month, SUUTI had appointed three merchant bankers — JPMorgan, Citigroup Global Markets and JM Financial — to facilitate sale of its stake in the bank.
The bank also reported strong fundamentals in its Q3 results. It reported a net profit of R1,604.11 crore for the quarter ended December 31, up 19% y-o-y. Net profit was boosted by a net interest income of R2,984.01 crore, up 19.61% y-o-y.
Profit was also boosted by lower provisioning during the third quarter and lending against foreign currency non-resident deposits.
The Axis Bank stake sale will help the government meet its target of raising Rs 16,027 crore for FY14. The government, in its bid to narrow the fiscal deficit, planned to raise Rs 40,000 crore in FY14 by selling its stakes in state-owned companies. However, during the interim budget presented on February 17, the finance minister revised the target down to Rs 16,027 crore.
The government has so far raised Rs 3,500 crore via stake sales, Rs 2,100 crore via buyback of shares (NHPC) and Rs 16,845 crore from special dividend (Coal India), taking the total to about Rs 22,400 crore.