Axis Bank eyes up to Rs 4,000 crore from stake sale in Axis Finance

Sale proceeds for capital infusion in arm; sale likely in 3-6 months

India’s third-largest private lender, Axis Bank, is looking to raise ₹2,000-4,000 crore by offloading a portion of its stake in its whollyowned subsidiary, Axis Finance, according to a source familiar with the development.

 

The bank will use the proceeds from the stake sale to fund the non-banking financial company (NBFC). This move comes after the Reserve Bank of India (RBI) indicated that it was not in favour of further direct equity infusion by the bank into the NBFC, the source added.

  Despite being a reluctant seller, Axis Bank is looking to bring in one or more new shareholders to provide the required growth capital for Axis Finance, the source further stated. 

Multiple private equity players and strategic investors have expressed interest in acquiring a stake in the NBFC, the source said.

An email sent to Axis Bank did not elicit a response.

 

In November 2024, Axis Bank Managing Director & Chief Executive Officer (CEO) Amitabh Chaudhry had told Business Standard that the RBI was not comfortable with the bank infusing additional equity into the NBFC, and, hence, at some stage, they would have to induct other shareholders. 

Currently, Axis Bank holds a 100 per cent stake in Axis Finance. Over the years, the bank has infused equity capital periodically to meet the NBFC’s growth requirements. In Q3FY25 (October–December 2024), Axis Bank injected ₹600 crore into Axis Finance. Over the past decade, it has infused around ₹1,775 crore in total, including ₹300 crore in FY24. 

Speculation about a stake sale in Axis Finance started after the RBI issued a draft circular in October 2024, proposing that multiple entities within a bank group should not engage in the same business or hold/acquire the same category of licence/authorisation or registration from any financial sector regulator. The circular also stated that overlapping lending activities between a bank and its subsidiaries would not be allowed. 

Feedback on the draft was due by November 20, 2024, and banks, both individually and through the Indian Banks’ Association (IBA), submitted their responses to the RBI. 

Analysts had said the RBI’s proposed norms could impact major banks, including Axis Bank, HDFC Bank, Kotak Mahindra Bank, and Federal Bank, which have overlapping subsidiaries. For instance, Axis Bank owns Axis Finance, ICICI Bank has ICICI Home Finance, Kotak Mahindra Bank operates Kotak Mahindra Prime and Kotak Mahindra Investments, and Federal Bank owns Fedbank Financial Services.

  Incorporated in 2013, Axis Finance is a systemically important non-deposit accepting NBFC. It is categorised as an NBFC-Middle Layer under the RBI’s scale-based regulatory framework.

  Axis Finance is engaged in providing corporate lending, collateralised loans, real estate loans, and MSME lending under the wholesale segment. The company has also forayed into retail loans since FY19, offering home loans, loans against property, business loans, and personal loans. 

As of December 2024, Axis Finance has assets under management of ₹39,700 crore. Its profit after tax for nine months ended December 2024 stood at ₹494 crore. It reported a gross non-performing asset ratio of 0.65 per cent and a net NPA ratio of 0.33 per cent.