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AXIS – ENAM: TRANSACTION STUDY. DEEPAL GANDHI & SHRAY KAMBOJ CORPORATE TEAM. 30.09.2011. THE REAL STORY: HOW THE IDEA WAS CONCEIVED. ICICI BANK . K V Kamath , MD & CEO of ICICI Bank. JOINED AXIS BANK . Chanda Kocchar. Shikha Sharma.

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axis enam transaction study

AXIS – ENAM: TRANSACTION STUDY

DEEPAL GANDHI & SHRAY KAMBOJ

CORPORATE TEAM

30.09.2011

the real story how the idea was conceived
THE REAL STORY: HOW THE IDEA WAS CONCEIVED

ICICI BANK

K V Kamath, MD & CEO of ICICI Bank

JOINED AXIS BANK

ChandaKocchar

Shikha Sharma

KV Kamath, Former MD & CEO of ICICI Bank retired on 30th April 2009.Chanda Kocchar & Shikha Sharma were the top contenders for the post. Shikha Sharma lost to ChandaKocchar and resigned to join as CEO of Axis Bank.

brain wave behind the scene
BRAIN WAVE: BEHIND THE SCENE
  • Drive to make Axis bigger than ICICI

Brain Wave

VallabhBhansali

Shikha Sharma

Anil Singhvi , Former Gujarat Ambuja CEO

enam scouting for groom
ENAM SCOUTING FOR GROOM :

VallabhBhansali

Nimesh Shah

Jagdish Master

Namura Securities Co, Japan

Enam was scouting for funds with Namura, Japan but the deal could not happen due to over valuation. Enam was founded in 1984 by ManekBhansali, Nimesh Shah, VallabhBhanshali and Jagdish Master, who were referred to as the ‘Formidable Four’ of Dalal Street.

initial structure
INITIAL STRUCTURE :

Deal announced- 17th Nov 2010

ENAM GROUP

AXIS BANK

consideration 3.3% Equity

wholly owned subsidiary

demerge IB & security business

ENAM SECURITIES

Valued at 2067 Cr

AXIS SECURITIES AND SALES (ASSL)

acquire

unique deal
UNIQUE DEAL :
  • Cashless transaction
  • No capital gain tax
  • VallabhBhansali to be on the board as an independent director;
  • Bank shares were used as currency for payment of certain business;
  • This deal will set a precedent for other deals in future– Insurance company or their division can be merged with banks.
rbi put the spanner
RBI PUT THE SPANNER :
  • Did not favourVallabhBhansali to come on Board of Bank;
  • Business was acquired not by Axis bank but by wholly owned subsidiary;
  • The intangible worth (goodwill) is huge i.e. 2067 – 274 Cr. RBI was not sure of treatment of goodwill in Axis bank books;
  • RBI was worried of other banks following the similar transaction.
revised scheme first leg
REVISED SCHEME:FIRST LEG
  • Announced on 16thseptember, 2011

Consideration 3.3% Equity

ENAM GROUP

AXIS BANK

DEMERGER

  • Enam gets 13.7 million shares of Axis Bank equivalent to 3.35% equity
  • 1 share of Enam to get 5.7 share of Axis Bank

ENAM SECURTIES

revised scheme second leg
REVISED SCHEME:SECOND LEG

AXIS BANK

Pay 274 cr cash equivalent to bookvalue of Enam business

SELL ENAM SECURITIES

ASSL (wholly owned subsidiary of axis bank)

roadmap now
ROADMAP NOW
  • Shareholder approval granted on 16th September, 2011;
  • Necessary approvals including that of the creditors of both the parties, apart from the High courts of Mumbai and Gujarat are to be taken ;
  • Approval by capital market regulator Securities and Exchange Board of India (SEBI) and periodic disclosure under SEBI (Issue of Capital and Disclosure Requirements ) Regulations 2009 is required;
  • The deal will take another approximately six months to complete;
  • Axis Bank could not convince RBI to allow Enam Securities Chairman, VallabhBhansali to become a director on its board.
opportunities ahead
OPPORTUNITIES AHEAD:
  • First time a commercial bank with (government DNA) has acquired an non- banking business by using shares as currency for such acquisition.
  • RBI is concerned of change in bank ownership due to such acquisition through share swap.
  • IRDA has announced regulation to govern M&A in government insurance space in the form of IRDA (Scheme for Amalgamation and transfer of General Insurance business) Regulation 2011, similar regulation needs to be issued by Banking Regulator - RBI to govern banking specific M&As.
  • RBI has prepared draft guidelines to issue banking licenses to private entities.  This move has facilitated ambitions of several industry giants showing interest to share a slice of the Rs. 64 trillion industry which is set to increase @ 20 % in the year 2014- 15*. Along with new entrants will come a flood of similar M&As.  We may capitalize on this growth and  set up a division constantly updating domain knowledge in the said sphere.

*FIDCI - Annual Survey Feb 2010, "Indian Banking Sector: The current state and road ahead"