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AXIS – ENAM: TRANSACTION STUDY

AXIS – ENAM: TRANSACTION STUDY. DEEPAL GANDHI & SHRAY KAMBOJ CORPORATE TEAM. 30.09.2011. THE REAL STORY: HOW THE IDEA WAS CONCEIVED. ICICI BANK . K V Kamath , MD & CEO of ICICI Bank. JOINED AXIS BANK . Chanda Kocchar. Shikha Sharma.

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AXIS – ENAM: TRANSACTION STUDY

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  1. AXIS – ENAM: TRANSACTION STUDY DEEPAL GANDHI & SHRAY KAMBOJ CORPORATE TEAM 30.09.2011

  2. THE REAL STORY: HOW THE IDEA WAS CONCEIVED ICICI BANK K V Kamath, MD & CEO of ICICI Bank JOINED AXIS BANK ChandaKocchar Shikha Sharma KV 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 ChandaKocchar and resigned to join as CEO of Axis Bank.

  3. BRAIN WAVE: BEHIND THE SCENE • Drive to make Axis bigger than ICICI Brain Wave VallabhBhansali Shikha Sharma Anil Singhvi , Former Gujarat Ambuja CEO

  4. ENAM SCOUTING FOR GROOM : VallabhBhansali Nimesh Shah Jagdish Master Namura Securities Co, Japan Enam was scouting for funds with Namura, Japan but the deal could not happen due to over valuation. Enam was founded in 1984 by ManekBhansali, Nimesh Shah, VallabhBhanshali and Jagdish Master, who were referred to as the ‘Formidable Four’ of Dalal Street.

  5. REASONS FOR MARRIAGE:

  6. INITIAL STRUCTURE : Deal announced- 17th Nov 2010 ENAM GROUP AXIS BANK consideration 3.3% Equity wholly owned subsidiary demerge IB & security business ENAM SECURITIES Valued at 2067 Cr AXIS SECURITIES AND SALES (ASSL) acquire

  7. UNIQUE DEAL : • Cashless transaction • No capital gain tax • VallabhBhansali 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 favourVallabhBhansali 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. 2067 – 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 16thseptember, 2011 Consideration 3.3% Equity ENAM GROUP AXIS BANK DEMERGER • Enam gets 13.7 million shares of Axis Bank equivalent to 3.35% equity • 1 share of Enam to get 5.7 share of Axis Bank ENAM SECURTIES

  10. REVISED SCHEME:SECOND LEG AXIS BANK Pay 274 cr cash equivalent to bookvalue of Enam business SELL ENAM SECURITIES ASSL (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, VallabhBhansali 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 increase @ 20 % in the year 2014- 15*. 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"

  13. Thank You!!

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