Private sector lender Axis Bank that informed the stock exchanges that its Board of Directors, in a meeting of convened on 2nd July, has approved a plan to raise around Rs 15,000 crore worth of the funds through various permissible instruments at an appropriate time as well. The move comes days after the lender’s Issuer Credit Rating was downgraded to the junk or BB+ by rating agency S&P Global also. Axis Bank is one of the top private-sector lenders in the country as well. Though its asset quality remains strong among the banking sector in our country India, the overhang of non-performing assets is a risk that rating agencies are foreseeing.
Axis Bank told the market of the regulator through a filing that it will raise the said around of Rs 15,000 crore through issue of an equity shares or the depository receipts and documents and/or any other instruments or such as the securities representing either an equity shares and/or the convertible securities linked to equity shares as well. The private sector lender added that it may also consider raising the funds through Qualified Institutions Placement (i.e. QIP) or American Depository Receipts (i.e. ADRs) or Global Depository Receipts (i.e. GDRs) program, the preferential allotment or the such other permissible mode or combinations as may be considered appropriate by the Board as well. The raising of funds is due for approval from the shareholders at the Annual General Meeting, because at the end of this month.
The rating action initiated against the Axis Bank was on account of the tight rope that many think that the financials are walking on currently in India. S&P Global, in another report, had told that the moratorium period clubbed with the already mounting NPA overhang has been pushed the recoveries for banks in India by years as well. The rating agency, although, added that the situation for the banking sector was improving prior to the onset of the coronavirus pandemic situation. India’s banking sector is staring at a capital shortfall of close to around $ 15 billion to meet a 10% weighted-average common equity Tier 1 ratio under a moderate stress scenario, Fitch Ratings said earlier this week. Meanwhile, the rating agency told that the majority of this will be needed by the state-run banks. Experts also say that unless the Reserve Bank of India agrees for an on-time restructuring, that a clearer picture of where the banking sector stands will only emerge at the end of this year.
Axis Bank shares were trading down by around 2% on the Bombay Stock Exchange on Thursday at a price of around Rs 425.3 per share. The stock has surged around 38% from its March lows but still, it remains below its valuation in the pre-coronavirus times. S&P BSE Sensex was up to 460 points or around 1.30% as it continues to inch up.