Axis Bank gets approval to raise up to Rs 15,000 cr to tide over Covid-19

These instruments could represent either equity shares or convertible securities linked to equity shares including through Qualified institutional placement/ American Depository Receipts| Photo: Shutterstock
Axis Bank’s board on Thursday approved the plan to raise Rs 15,000 crore through a variety of instruments to shore up its capital base amid the Covid-19 disruptions.

These instruments could represent either equity shares or convertible securities linked to equity shares, including through qualified institutional placement (QIP), American depository receipts (ADRs), global depository receipts (GDRs), preferential allotment or such other permissible mode or combinations as may be considered appropriate by the board, the bank said in an exchange filing.

The capital adequacy ratio of Axis bank stood at 17.53 per cent as of March 31, with CET-I ratio at 13.34 per cent. 

Shares of the private lender closed 2.24 per cent lower at Rs 423.55 on the BSE. 

Rating agency Fitch has said Indian banks are likely to require at least $15 billion in fresh capital to meet a 10 per cent weighted-average common equity Tier-I ratio under a moderate stress scenario. The amount could rise to about $58 billion in a high-stress situation where the domestic economy fails to recover from Covid-19.

Banks have made significant provisions due to Covid-19 in the March quarter but given that the situation is deteriorating and the moratorium on repayments has been extended, they may need to make more provisions in the future.

In Q4FY20, the provisions made by Axis bank rose 185 per cent to Rs 7,730 crore, which includes Rs 3,000 crore provided for Covid-19, taking the overall additional provisional held by the bank to Rs 5,983 crore.

The bank provided Rs 4,204 crore in Q4FY20 for bad loans, against Rs 1,714 crore in the same period a year ago. The provision coverage ratio (PCR) of the bank improved to 69 per cent at the end of Q4FY20, against 62 per cent in Q4FY19. 

Meanwhile, the lender has notified the stock exchanges that it will hold its annual general meeting on July 31 via videoconferencing.  Last week, Standard & Poor’s downgraded Axis Bank’s issuer ratings to BB+ due to challenging or worsening operating environment amid Covid-19, taking a toll on asset quality and credit cost.

Bank to shut UK subsidiary

Axis Bank has decided to shut down operations of Axis Bank UK, a subsidiary of the bank, and is looking to surrender its banking licence by the end of April 2021. It is in talks with the UK regulators — the Prudential Regulation Authority and the Financial Conduct Authority. 

The private lender wants to focus more on the Indian market and has been reviewing its international strategy for some time now. It said the closure will not have any material impact on the operations or the financial position of the bank. Subrata Panda

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