Axis Bank Board approves Rs 15,000 crore fundraising plan to shore up capital; stocks fall 3%

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Published: July 2, 2020 1:02 PM

Private sector lender Axis Bank informed the stock exchanges that its Board of Directors, in a meeting convened on July 2, has approved a plan to raise Rs 15,000 crore worth of funds through various permissible instruments at an appropriate time.

Axis Bank told the market regulator through a filing that it will raise Rs 15,000 crore.

Private sector lender Axis Bank informed the stock exchanges that its Board of Directors, in a meeting convened on July 2, has approved a plan to raise Rs 15,000 crore worth of funds through various permissible instruments at an appropriate time. The move comes days after the lender’s Issuer Credit Rating was downgraded to junk or BB+ by rating agency S&P Global. Axis Bank is one of the top private-sector lenders in the country. Although its asset quality remains strong among the banking sector in India, the overhang of non-performing assets is a risk that rating agencies are foreseeing.

Axis Bank told the market regulator through a filing that it will raise the said Rs 15,000 crore through issue of equity shares/ depository receipts and/or any other instruments or securities representing either equity shares and/or convertible securities linked to equity shares. The private sector lender added that it may also consider raising the funds through Qualified Institutions Placement (QIP)/ American Depository Receipts (ADRs)/ Global Depository Receipts (GDRs) program, preferential allotment or such other permissible mode or combinations as may be considered appropriate by the Board. The raising of funds is due for approval from shareholders at the Annual General Meeting, due at the end of this month.

The rating action initiated against Axis Bank was on account of the tight rope that many think financials are walking on currently in India. S&P Global, in another report, had said that the moratorium period clubbed with the already mounting NPA overhang has pushed the recoveries for banks in India by years. The rating agency, however, added that the situation for the banking sector was improving prior to the onset of the coronavirus pandemic. India’s banking sector is staring at a capital shortfall of close to $ 15 billion to meet a 10% weighted-average common equity Tier 1 ratio under a moderate stress scenario, Fitch Ratings said earlier this week. However, the rating agency said that the majority of this will be needed by state-run banks. Experts say that unless the Reserve Bank of India agrees for an on-time restructuring, a clearer picture of where the banking sector stands will only emerge at the end of this year.

Axis Bank shares were trading down by 2% on the Bombay Stock Exchange on Thursday at a price of Rs 425.3 per share. The stock has surged 38% from its March lows but still remains below its valuation in the pre-coronavirus times. S&P BSE Sensex was up 460 points or 1.30% as it continues to inch up.

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