In order to maintain an adequate level of capital for risk-weighted assets and fund business growth, the private sector lender Axis Bank has decided to raise up to ₹50,000 crores through debt securities and equity share. Axis bank said in a regulatory filing that based on this proposal ₹35,000 crores will be raised through debt securities in Indian or foreign currency, the remaining ₹15,000 crores will be raised through the issuance of equity shares or securities convertible into equity shares. The board of the bank has already given its approval regarding this. The bank intends to seek its shareholder’s approval for the proposal in the coming Annual General Meeting (AGM) to be held on July 31, 2020.
The bank may need to raise additional capital in one or more transactions in its market in India as well as overseas to maintain the desired capital to risk-weighted assets ratio (CRAR) by the issue of debt securities in the denomination of Indian rupees or any other foreign currency. More capital has to be raised to meet the projections of the bank in domestic and overseas operations. The bank intends to issue debt securities via instruments like long term bonds, masala bonds, green bonds, non-convertible debentures, and convertible debentures on a private placement basis for a period of one year from the date of passing of this resolution.
In June 2018, Axis Bank got approval for a borrowing limit of ₹200000 crores from its members. Now the bank is seeking permission from its shareholders to borrow funds for an amount below ₹35,000 crores on a private placement basis as it falls within the overall limit approved for in 2018. COVID-19 pandemic has significantly impacted many businesses across the country therefore Axis bank said that a stronger capital base will strengthen their ability to deal with such unanticipated contingencies or disruptions in the market which may arise due to the pandemic in the coming days.
Well capitalized banks continue to have strong lending opportunities, and also have a strong relative competitive position in the sector. The bank said that in order to further reinforce the CET 1 ratio and be well placed from a position of strength to deal with the COVID-impact on business while making sure that there is capital to stimulate growth as the economy revives, the bank is proposing to raise equity capital of no more than 15,000 crores. It said that the board at the AGM would seek permission from members to develop, sell, issue and distribute a certain number of equity shares and/or equity shares with or without a greenshoe option through depository receipts and/or securities convertible into equity shares or any other instrument or securities representing equity shares through a private placement, including eligible institution placement (Q). The stock price of Axis bank closed 1.17 percent higher at ₹428.50 apiece on BSE.
