Axis Bank is considering selling 80-100% of its stake in Axis Finance if a buyer offers a premium for control. Investment bank Morgan Stanley has been engaged to identify potential buyers. This move aligns with the Reserve Bank of India’s (RBI) proposed regulations on business overlaps and holding limits for banks in their subsidiaries.
Sources indicate that Axis Bank has decided against a public listing for Axis Finance in favor of a private sale, anticipating higher valuations. The bank, which is India’s third-largest private lender, is aiming for a valuation of approximately $1 billion for its wholly owned non-banking finance company (NBFC) subsidiary.
The RBI’s draft regulations require scheduled commercial banks to reduce their stakes in subsidiaries, including NBFCs, to 20% or less within two years. Additionally, the RBI proposes that multiple entities within a bank should not engage in similar business activities, preventing overlap in lending operations.
According to insiders, the book value of Axis Finance is around ₹4,000 crore, and potential buyers are discussing a valuation of two times the book value, plus a control premium, which could bring the total valuation to ₹8,000-10,000 crore. Negotiations with interested private equity buyers have recently commenced, reflecting the strength of Axis Finance’s business model.
