Axis Bank gets board’s nod to raise up to Rs 15,000 crore

Axis Bank on Thursday said it has received board approval to raise up to Rs 15,000 crore in equity capital. The capital could be raised through equity shares/depository receipts or other instruments, including through qualified institutional placement (QIP), preferential allotment or other permissible mode or combinations of these. The proposal will be among those presented before the bank’s shareholders at its 26th annual general meeting (AGM). Axis Bank had last raised Rs 12,500 crore in September 2019 through a QIP. The bank’s shares ended 1.92% lower than their previous close at Rs 424.95 on the BSE on Thursday.

On Wednesday, Fitch Ratings had said that Indian banks are likely to require at least $15 billion in fresh capital to meet a 10% weighted-average common equity tier I ratio under a moderate stress scenario. This rises to about $58 billion in a high-stress situation where the domestic economy fails to recover from the coronavirus pandemic-related disruption. State-owned banks will require the bulk of the recapitalisation as the risk of capital erosion for them is significantly higher than private banks. “We expect the majority of the injection to come through in FY22, as bad loan recognition has been pushed back by a 180-day regulatory moratorium,” analysts at Fitch said. The rating firm added that a clearer picture could emerge from December 2020, unless the central bank agreed to a one-time loan restructuring, which would affect the timely recognition and resolution of bad loans.

Axis Bank’s overall capital adequacy stood at 17.53% with a common equity tier I (CET I) ratio of 13.34% as at the end of FY20. Axis Bank has said its focus remains on conserving capital in the short term. Its risk weighted assets (RWA) to total assets stood at 67%.

The announcement by Axis Bank follows similar ones by its peers from the private sector. Banks have been fortifying their capital bases amid the uncertainty arising out of Covid-19 and against likely asset quality shocks. Earlier, HDFC Bank had said that it was proposing to raise up to Rs 50,000 crore via unsecured perpetual debt instruments – part of additional tier I capital, tier II capital bonds and long term bonds – from the domestic market through the private placement route. ICICI Bank has raised over Rs 3,000 crore by selling stakes in its two insurance subsidiaries. State Bank of India (SBI) has approved a plan to divest a 2.1% stake in SBI Life and Kotak Mahindra Bank has raised Rs 7,442.5 crore through a qualified institutional placement (QIP).