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Axis Bank, Enam strike `2,067cr merger deal
Axis Bank, through its wholly owned subsidiary (Axis Securities and Sales Ltd.), has entered
into an all-share deal with Enam Securities, following which the investment banking and
equity management business of the latter will be merged with the bank. Enam AMC, which
looks after the asset management business, is not part of the deal.
Enam Securities, the institutional broking arm that also looks after investment banking,
and Enam Direct, the retail broking arm, have been merged with Axis Bank in a deal
worth `2,067cr. The bank will issue 5.7 shares for every share held in Enam Securities.
Enam Securities will own 3.3% equity stake of Axis Bank post the deal. After the deal,
Enam will become a 100% subsidiary of Axis Bank and Enam’s promoter Vallabh Bhansali
will get a position on the board of the bank. Another promoter, Manish Chokani, will
become the chairman of the new broking subsidiary. The deal involves a non-compete
agreement in the businesses, which are transferred for a period of five years and the right
to use the Enam brand name to the bank for a period of two years.
`242cr, while PBT stood at `92cr. Similarly for FY2011 (till October 20, 2010), total
income stood at `182cr, with PBT of `77cr. The bank’s management feels that the merger
will create a strong corporate investment banking entity with Axis Bank having the
corporate and commercial expertise, and Enam will bring in its investment banking
experience.
This move by Axis Bank is seen as a step to ramp up its capital market and investment
banking division. We think the deal will help the bank in further enhancing the strong fee
income that it already enjoys. At the CMP, the stock is trading at 2.75x FY2012E ABV of
`532.8. Post the recent fall in the stock, we recommend Buy on the stock with a Target
Price of `1,705, valuing it at 3.2x FY2012E ABV.
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