Axis Finance to become upper-layer NBFC; listing likely within 3 years

Axis Bank CEO Amitabh Chaudhry says the NBFC arm's size qualifies it for upper-layer classification; stake sale planned to raise growth capital amid RBI's revised norms

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Axis Finance, the wholly owned non-banking finance subsidiary of Axis Bank, is set to be classified as an upper-layer NBFC, following which the bank plans to list the company on the stock exchanges, the lender’s senior management said on Wednesday.

 

“Axis Finance will become an upper layer in the NBFC space very soon given the size of its AUM, and that will also mean that we get onto this path of having to list it at some stage in the future,” said Amitabh Chaudhry, Managing Director and Chief Executive Officer, Axis Bank.

 

According to Reserve Bank of India (RBI) guidelines, a non-banking financial company (NBFC) identified as part of the upper layer must mandatorily list its shares on a recognised stock exchange within three years of such classification.

 

Stake sale to fund growth

 

Chaudhry said the bank is also exploring a partial stake sale in Axis Finance to raise growth capital for the NBFC. The move is necessitated by the RBI’s directive that prohibits banks from infusing additional equity into their non-banking subsidiaries beyond a certain threshold. 

 

However, investor interest in Axis Finance had been dampened due to uncertainty surrounding the RBI’s Forms of Business circular, which proposed to prevent overlap between the activities of banks and their group entities.

 

This month, the RBI proposed removing the overlap restriction, easing concerns around the planned stake sale and paving the way for new investors to participate in Axis Finance.

 

“On Axis Finance, we are going through a process. One of the things that the RBI governor has talked about is that they will give banks some leeway when it comes to the Forms of Business circular. We are awaiting the details of what RBI has in mind,” Chaudhry said.

 

Awaiting clarity from RBI

 

Chaudhry noted that Axis Finance continues to perform well and has specific capital needs that the parent must support through strategic means.

 

“Axis Finance is growing quite well, and it has its capital requirements. We need to ensure, as the owner of Axis Finance, that it gets capital at the right time,” he said.

 

“We will continue to evaluate our options and do the right things for Axis Finance. Hopefully, the Forms of Business circular is not very far away, and that will give us clear direction on the flexibility we have,” Chaudhry added.

 

He said several factors are being weighed as the bank reviews fundraising options for Axis Finance. “There are quite a few factors at play, and obviously, we are taking all of them into account as we evaluate raising money in Axis Finance,” Chaudhry said.