Axis Bank stock falls 2% amid block deal buzz

Shares of Axis Bank declined over 2% in opening deals on Tuesday amid a report that U.S.-based private investment firm Bain Capital will offload stake in the private lender via block deals today. Bain Capital, which currently holds a 4.24% share in Axis Bank, will sell a 1.24% stake in the lender, which is likely to fetch the investor $410 million (₹3,350 crore). The floor price for the deal is likely to be ₹888 per share, a discount of 2% to Monday’s closing price of ₹903 on the BSE.

Bain Capital acquired a stake in Axis Bank in November 2017 by investing ₹6,854 crore in the bank. At the end of the September quarter, the investment firm owns 4.24% shares in Axis Bank through three entities - BC Asia Investments VII, BC Asia Investments III, and Integral Investments South Asia IV - under the foreign direct investment (FDI) category. As per deal terms, BC Asia Investments VII will sell a 1.24% stake in the private lender at a floor price of ₹888. JPMorgan is the broker to the block trade.

On Tuesday, Axis Bank share price opened a tad lower at ₹903 and declined as much as 2.43% to hit a low of ₹883.8 on the BSE in the opening deals. The banking stock hit a 52-week high of ₹919.95 after it reported strong earnings in the September quarter, while it touched a 52-week low of ₹618.10 on May 23, 2022. The market capitalisation of the Sensex heavyweight stood at ₹2.72 lakh crore.

In comparison, the BSE Sensex was trading 320 points higher at 61,067 levels, with 25 of its constituents floating in positive terrain. Axis was the top laggard on the Sensex pack, followed by L&T, Tata Steel, and Bharti Airtel, which declared their respective results post market hours on Monday.  

Last week, Axis Bank, the country’s third largest private sector lender, released its second quarter earnings report, which topped analysts’ estimates. The bank posted a consolidated net profit of ₹5,625 crore, up 66% for the quarter ended September 2022, compared to ₹3,383 crore in the same period last year. On a standalone basis, the profit jumped 70% to ₹5,330 crore, from ₹3,133 crore in the year-ago quarter.

The net interest income (NII), the difference between interest revenues and interest expenses, grew 31% year-on-year to ₹10,360 crore, from ₹7,901 crore in the corresponding period last year. The net interest margin (NIM) stood at 3.96%, up 57 basis points as compared to the same period last year.

The bank’s core operating profit for the quarter grew 43% YoY and 19% QoQ to ₹7,802 crore. Operating profit for the quarter grew 30% YoY and 31% QoQ to ₹7,716 crores.

On the asset quality front, the gross non-performing asset (GNPA) ratio of the bank declined to 2.50%, from 3.53% in Q2 FY22 and 2.76% in the June quarter of the current fiscal (Q1 FY23). Net non-performing assets (NNPA) as a percentage of net advances more than halved to 0.51% in Q2FY23, as against 1.08% in the same period last year.

During the quarter under review, provisions fell to ₹550 crore, as against ₹1,735 crore a year ago.  The lender’s provision coverage, as a proportion of Gross NPAs, stood at 80%, as compared to 70% in the year-ago period and 77% as at June 30, 2022.