Axis Bank to raise $100 mn as debt, another $50 mn as equity from IFC

IFC to invest in a fixed-rate, infrastructure bond issued by the bank

Axis Bank plans to raise $100 million by a loan and another $50 mn by way of equity from the International Finance Corporation (IFC). IFC, part of the World Bank Group, said its board of directors had approved both proposals. The loan investment of up to $100 mn equivalent in rupees would be in a fixed-rate, infrastructure bond issued by Axis. Axis is the third largest private sector bank in India, with assets of $64 billion as of September 30. It has about 2,500 domestic branches, including extension counters. It also has offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai and Abu Dhabi, besides a subsidiary in London.

IFC said the longer-term funding would support Axis in growing its infrastructure and affordable housing finance portfolio. Both areas have bee declared a priority by the new government at the Centre.

"Given the high level of non-performing loans in public sector banks, private banks are expected to play a vital role in channelling liquidity to infrastructure and affordable housing. Axis Bank has traditionally been a leading financier of (both segments) and the proposed project will support it in further expanding this business," said IFC.

The recent directive of the Reserve Bank of India (RBI) in allowing banks to issue infrastructure bonds will result in the creation of a new asset class for investors. Success of the proposed bond issue, it is expected, would send a positive signal to other banks and help promote this asset class.

IFC said Reserve Bank regulations did not permit banks to invest in the infrastructure bonds issued by other lenders.

Since banks are significant investors in the domestic bond market, their absence here could have an adverse effect on the aim mentioned earlier. IFC's participation was expected to attract sufficient liquidity from other high-quality domestic and foreign investors to support the bond issue.