Axis seals Enam deal with revised structure

The 10-month uncertainty over Axis Bank’s acquisition of the financial services business of Enam Securities has finally ended, with the lender’s board on Friday approving a revised deal structure mandated by the Reserve Bank of India (RBI).

While Axis Bank has stuck to an all-stock deal as proposed in November last year, it will now sell the business to its arm, Axis Securities and Sales, for Rs 274 crore in cash. The amount represents the book value of Enam’s financial services business. The move comes after the RBI approved the revised deal structure, under which Axis Bank will issue 13.8 million shares to Enam shareholders on the basis of the previously agreed swap ratio of 5.7 shares of the bank for every one share of the broking firm.

“The above actions are proposed to be undertaken pursuant to a scheme tabled and approved by the board at its meeting, which was formulated in compliance with the conditions prescribed by the RBI,” Axis Bank said in a statement.

The central bank had earlier expressed discomfort over the structure of the original deal as it involved the bank offering its shares though the acquisition was done by the lender’s subsidiary. It had asked the bank to revise the scheme of accounting and change the eventual structure of the business to be acquired. The bank had written to the RBI, seeking “certain modifications” in the conditions specified as they increased the tax burden. The RBI had also stalled Axis Bank’s plan to induct Vallabh Bhansali, co-founder and chairman of Enam, as an independent director on the bank’s board.

It was proposed Enam shareholders would get 3.3 per cent stake in the bank on the enlarged capital. The deal value is estimated around Rs 2,067 crore. The bank’s financials so far do not include earnings of Enam’s businesses.