InvestorQ : What does Axis Bank propose to do with the Rs.50,000 crore that it is supposed to raise?
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What does Axis Bank propose to do with the Rs.50,000 crore that it is supposed to raise?

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Anu Biswas answered.
4 months ago
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Axis Bank will raise Rs.50,000 crore via debt securities and equity shares to maintain an adequate level of capital for risk-weighted assets as well as a reserve to finance growth. The plan is that the bank will raise Rs.35,000 crore by way of debt securities and the balance Rs.15,000 crore via issuance of equity shares or securities convertible into equity.

Final approval for the same will be sought in the AGM scheduled on July 31, 2020. Axis needs to raise additional funds in the Indian or overseas market to maintain desired capital to risk weighted assets ratio or CRAR ratio. This will also give Axis Bank the leeway to develop and grow its lending business when the economy picks up post COVID.

As on March 31, 2020, the bank's common equity Tier I (CET 1) ratio was 13.34%, which is comfortable and well above the statutory requirement. However, these requirements will increase once the RBI adopts Basel III requirements, when CET1 has to scale 8%. For Axis Bank, a stronger capital base will enhance its ability to deal with contingencies.

The Rs.15,000 crore that the bank proposes to raise via equity will be useful to strengthen CET-1 ratio as well as be well placed to deal with the COVID-impact. The bank needs capital to support growth as the economy revives. The equity component will be predominantly raised through private placement to qualified institutional buyers or QIBs.

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