RBI clears Axis-Enam deal, integration likely in 3rd qtr

Enam promoter Bhansali made advisor, no other strings attached

Axis Bank’s proposed acquisition of Enam Securities’ businesses has received the final approval from the Reserve Bank of India (RBI). The bank now aims to integrate these operations by the end of the third quarter of this financial year. Initially, Axis will use the Enam brand. A re-branding exercise will be done a few months after the integration.

According to sources, Axis Bank’s consolidated earnings for the October-December quarter, which will be announced in January 2013, are likely to reflect the financial performance of Enam’s businesses.

The third largest private sector bank had announced its plan to buy the equities and investment banking businesses of Enam in November 2010. The structure of the deal had to be reworked after the banking regulator raised some objections.

“The deal has now been cleared by the RBI without any more riders. We need to get approval from the Securities and Exchange Board of India (Sebi), the high court, and also from our shareholders and creditors. We expect this process to be complete and the integration to happen by the end of the third quarter,” a person familiar with the development told Business Standard, requesting anonymity.

It is also learnt that Enam’s co-founder and chairman Vallabh Bhansali will act as an advisor to Axis Securities and Sales, the wholly owned subsidiary of the bank with which the businesses will be merged.

The proposal to induct Bhansali on Axis Bank's board was withdrawn, following the RBI's discomfort. The bank had submitted a revised deal structure to the RBI in September 2011.

Sources confirmed that under the revised structure submitted by the bank, the deal would be an all-stock one. Enam’s shareholders will get 13,782,600 equity shares on the basis of the agreed swap ratio of 5.7 shares of the bank for every equity share of the broking firm.

After the transaction, the bank will sell the business to Axis Securities and Sales and receive a “notional” cash consideration of close to Rs 274 crore, which represents the book value of Enam's businesses. The businesses that will be merged include investment banking, institutional equities, retail equities and related operations such as the distribution of financial products.

The deal value includes Axis Bank’s right to use the Enam brand. “We'll be using it initially after the integration. Any re-branding exercise will happen only a few months after the integration,” said a source.