Axis Bank suggests 3 ways to exit PE arm

Axis Bank has proposed three possible solutions for Axis Private Equity, the arm it founded and now wishes to exit from, to the domestic investors who have been opposing the proposed move.

According to a report from a news channel, the bank told the opposing investors that the private equity (PE) fund could be sold to another professional PE firm. Or, there could be a disinvestment. Alternatively, it suggested, the opposing investors should recommend a plan.

The bank had invited bids to sell its stake in the PE fund. Six months earlier, Lanco Infrastructure, IL&FS Investment Managers, Aditya Birla PE, Edelweiss Capital, Shapoorji Pallonji group, Elephant Capital and US-based Darby Private Equity had filed expressions of interest for taking over the fund.

In the disinvestment proposal, Axis would sell its investments over a period of time and distribute the proceeds to all the investors.

It has ruled out selling the fund to the present managers, something the latter had proposed in February. The investors opposed this move, as they said they had put in money in the fund due to Axis Bank’s credibility.

“If Axis Bank wants to exit the fund, we would also like to get out, since we were in due to the bank's credibility,” said a senior official with a public sector bank. “Now that options are open, including liquidating the investments of the PE, we will work out a solution beneficial to investors.”

Domestic investors include six leading public sector banks — Punjab National, Bank of Baroda, Union Bank, Canara Bank, United Bank and Corporation Bank. These six had invested Rs 185 crore in the PE arm. The Essar Group, Reliance Industries, Mercator Lines, Era Construction and Serum Institute had also reportedly put in Rs 100 crore via different investment vehicles.

Axis wants to exit the fund as it is a non- strategic business to its banking operations. In the previous attempts, the bank could not get all the investors to the discussion table and agree on a common solution. At present, the fund has Rs 400 crore invested in five companies.