India’s Axis Bank Ltd shall raise 116.26 billion rupees ($1.8 billion U.S.) to reinforce its capital base with the sale of shares and warrants to investors that include Bain Capital and the Indian insurer Life Insurance Corp (LIC).
Axis Bank, India’s third-biggest among private sector banks, stated that the board has endorsed the sale of 172.63 million shares at 525 rupees per share and 45.36 million convertible warrants at 565 rupees per warrant.
Before the news, Axis shares had closed at 544.80 rupees an 0.8 percent increase in the Mumbai market which gained 0.1 percent. This year, the stock is up 21 percent underachieving compared to 40 percent rise in the banking sector index as well as the 26 percent gain in the main market index.
The capital raising “will bolster the capital adequacy of the bank, thereby providing growth capital for the core business … and its subsidiaries,” the bank said in a statement shortly after obtaining the board’s approval for the fundraising.
The raise follows as the bank watched faulty loans significantly increase during the second quarter after a central bank audit. State-run lenders make up the majority of of India’s record $146 billion faulty loans but, some private sector lenders have contributed to the debt in the recent quarters.
Regardless of the increase in faulty loans, Axis Bank’s capital adequacy ratio was at 16.32 percent of assets in the end of September. The bank will raise 90.63 billion rupees from the share sale and 25.63 billion rupees from the sale of warrants.
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Bain Capital will invest 68.54 billion rupees into the bank and LIC which already owns a stake will invest another 15.83 billion rupees. Axis Bank’s investment banking division Axis Capital advised the deal while JP Morgan advised Bain Capital.
Axis Bank said will present the plan to shareholders for a vote on Dec. 8.