Axis Bank reassessing plan to sell stake in Axis Finance – Delhi News Daily

Mumbai: Axis Bank is reassessing its plans to sell a stake in its non-banking subsidiary Axis Finance, as it waits for greater clarity on the Reserve Bank of India’s upcoming “forms of business” circular.

The rethink comes after potential investors, who had shown interest in the transaction, sought regulatory clarity before arriving at valuations.

“Potential investors have made it clear that they want regulatory clarity before putting a number on the table. Without that, it’s difficult for them to firm up valuations,” said a person aware of the matter.

Axis Bank did not respond to a request for comment.

RBI governor Sanjay Malhotra recently signalled that the circular was in the works. “The forms of business circular is also planned to be finalised quickly,” Malhotra said on August 25.

As reported by ET in its June 27 edition, Axis Bank had committed to the RBI that it would not infuse additional capital into Axis Finance and was working on a plan to raise Rs 3,000 crore. The lender was exploring a strategic sale to private equity investors, with a potential IPO at a later stage.”As per its growth plans, Axis Finance will need a couple of thousand crores of capital over the next few years,” Amitabh Chaudhry, MD & CEO of Axis Bank, had told ET in an earlier interview. “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. 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.”The commitment to the RBI stems from draft guidelines issued last October on forms of business and prudential regulation for investments. These rules have weighed on valuations of bank subsidiaries by restricting them from undertaking core lending activities and discouraging duplication of businesses between banks and their NBFC arms.

Products such as gold loans, loans against property and two-wheeler loans are currently offered by both Axis Bank and its finance subsidiary.

In July, media reports suggested that global private equity giants including Blackstone, Advent, EQT and Kedaara had expressed interest in acquiring a 20% stake in Axis Finance.

The sector, however, has seen valuation headwinds. Recently, HDB Financial Services hit the market at a steep discount-nearly 40% lower than its price in the unlisted market.