Axis Bank's multi-year low valuations a worry for investors

In addition, there's also growing stress in the bank's SME (small and medium enterprise) loans, a segment which was fast growing until FY20

Axis Bank is among the few lenders to have closed two successful rounds of capital raise (approximately Rs 25,000 crore) in less than a year, as well as grow its business at 13 per cent in the June quarter (Q1).

However, the Street doesn’t seem to have been too enthused, which reflects in its 41 per cent year-to-date price erosion, and multi-year low valuation of 1.3x its FY22 estimated book.

Instead, its multiples may be reflecting parameters on which the lender has failed to meet expectations.

For instance, Axis may be way off its earlier stated 18 per cent return on equity