Presentation on theme: "AXIS – ENAM: TRANSACTION STUDY"— Presentation transcript:
1 AXIS – ENAM: TRANSACTION STUDY DEEPAL GANDHI & SHRAY KAMBOJCORPORATE TEAM
2 THE REAL STORY: HOW THE IDEA WAS CONCEIVED ICICI BANKK V Kamath, MD & CEO of ICICI BankJOINED AXIS BANKChanda KoccharShikha SharmaKV Kamath, Former MD & CEO of ICICI Bank retired on 30th April 2009.Chanda Kocchar & Shikha Sharma were the top contenders for the post. Shikha Sharma lost to Chanda Kocchar and resigned to join as CEO of Axis Bank.
3 BRAIN WAVE: BEHIND THE SCENE Drive to make Axis bigger than ICICIBrain WaveVallabh BhansaliShikha SharmaAnil Singhvi , Former Gujarat Ambuja CEO
4 ENAM SCOUTING FOR GROOM : Vallabh BhansaliNimesh ShahJagdish MasterNamura Securities Co, JapanEnam was scouting for funds with Namura, Japan but the deal could not happen due to over valuation. Enam was founded in 1984 by Manek Bhansali, Nimesh Shah, Vallabh Bhanshali and Jagdish Master, who were referred to as the ‘Formidable Four’ of Dalal Street.
5 REASONS FOR MARRIAGE: BANK AXIS ENAM SECURITITIES - Commonality with client profile- Entry into equity capital market- Larger market capital- One stop financial shop
6 INITIAL STRUCTURE : AXIS BANK ENAM GROUP ENAM SECURITIES Deal announced- 17th Nov 2010ENAM GROUPAXIS BANKconsideration 3.3% Equitywholly owned subsidiarydemerge IB & security businessAXIS SECURITIES AND SALES (ASSL)ENAM SECURITIESValued at Cracquire
7 UNIQUE DEAL : Cashless transaction No capital gain tax Vallabh Bhansali to be on the board as an independent director;Bank shares were used as currency for payment of certain business;This deal will set a precedent for other deals in future– Insurance company or their division can be merged with banks.
8 RBI PUT THE SPANNER :Did not favour Vallabh Bhansali to come on Board of Bank;Business was acquired not by Axis bank but by wholly owned subsidiary;The intangible worth (goodwill) is huge i.e – 274 Cr. RBI was not sure of treatment of goodwill in Axis bank books;RBI was worried of other banks following the similar transaction.
9 REVISED SCHEME:FIRST LEG Announced on 16th september, 2011Consideration 3.3% EquityENAM GROUPAXIS BANKDEMERGEREnam gets 13.7 million shares of Axis Bank equivalent to 3.35% equity1 share of Enam to get 5.7 share of Axis BankENAM SECURTIES
10 REVISED SCHEME:SECOND LEG AXIS BANKPay 274 cr cash equivalent to bookvalue of Enam businessSELL ENAM SECURITIESASSL (wholly owned subsidiary of axis bank)
11 ROADMAP NOW Shareholder approval granted on 16th September, 2011; Necessary approvals including that of the creditors of both the parties, apart from the High courts of Mumbai and Gujarat are to be taken ;Approval by capital market regulator Securities and Exchange Board of India (SEBI) and periodic disclosure under SEBI (Issue of Capital and Disclosure Requirements ) Regulations 2009 is required;The deal will take another approximately six months to complete;Axis Bank could not convince RBI to allow Enam Securities Chairman, Vallabh Bhansali to become a director on its board.
12 OPPORTUNITIES AHEAD:First time a commercial bank with (government DNA) has acquired an non- banking business by using shares as currency for such acquisition.RBI is concerned of change in bank ownership due to such acquisition through share swap.IRDA has announced regulation to govern M&A in government insurance space in the form of IRDA (Scheme for Amalgamation and transfer of General Insurance business) Regulation 2011, similar regulation needs to be issued by Banking Regulator - RBI to govern banking specific M&As.RBI has prepared draft guidelines to issue banking licenses to private entities. This move has facilitated ambitions of several industry giants showing interest to share a slice of the Rs. 64 trillion industry which is set to 20 % in the year *. Along with new entrants will come a flood of similar M&As. We may capitalize on this growth and set up a division constantly updating domain knowledge in the said sphere.*FIDCI - Annual Survey Feb 2010, "Indian Banking Sector: The current state and road ahead"