Axis Bank buys Enam Securities investment arm

All-stock deal valued at Rs 2,067 crore

However, Enam’s asset management company and insurance broking unit are not part of the deal, Axis Bank Managing Director Shikha Sharma said here.

Briefing reporters, she said: “We believe this is a great strategic fit...great cultural fit... and the consideration (for the deal) is Rs 2,067 crore paid in stock of Axis Bank.” 

However, she added that the deal is subject to regulatory clearance from the Reserve Bank of India and the market regulator Sebi.

Sharma said this merger is in line with the bank’s strategy of continuously expanding its product and service offerings to its customers in order to deepen its relationships and value differentiators.

Manish Chokhani would be Managing Director and Chief Executive Officer of the proposed entity, while Jagdish Master will continue to provide guidance, as a board member of the wholly-owned subsidiary.

Enam Securities, which was set up in 1984 as a financial services services provider, is a privately held company.  Enam’s fiscal year 2011 profit after tax (PAT) is at around Rs 120 crore, while the same in the earlier fiscal stood at about Rs 100 crore.

Analysts maintain that the deal was path breaking initiative for Axis Bank, especially gettting Bhansali and Chokhani on the bank board is seen as a good move. Axis Bank is one of the leading private sector lenders of the country with a network of about 1,000 branches spread across the country.

Demerge businesses

As per the merger agreement between both the entities, Enam Securities will demerge its investment Banking, institutional equities, retail equities and related businesses such as distribution of financial products, NBFC, etc to a wholly owned subsidiary of Axis Bank, Sharma said.

Axis Bank will also demerge its Investment Banking business into the wholly-owned subsidiary, she added.

As part of the agreement, Enam shareholders will receive 5.7 shares of Axis Bank for every one share held in of the financial services provider. This would result into about 3.3 per cent equity stake of Axis Bank on enlarged capital.

The proposed transaction would create one of India’s leading financial services powerhouses combining the investment banking and equities franchise of Enam Securities with the dominant debt capital markets and commercial banking franchise of Axis Bank, the bank said.

The strategic objective is to create a complete bouquet of financial products and services for corporate, institutional and individual clients that will enhance the ability of the combined entity to better serve client needs in a seamless manner across product categories and geographies, it said.

With Axis Bank’s distribution platform of almost 1,100 branches and Enam’s retail network, the combined entity will have an unparalleled opportunity to build a dominant retail franchise as well, it added.

The Board of Axis Bank proposes to induct Vallabh Bhansali, Co-founder & Chairman of Enam, as independent director, subject to approval from Axis Bank’s shareholders and the RBI, it said.

Enam’s shareholders have demonstrated their confidence in the combination by their acceptance of Axis Bank shares in exchange of their ownership of the painstakingly built investment bank, Bhansali said.