Acquiring the investment banking business of Enam Securities will bolster Axis Bank's equity underwriting business, where it is currently positioned at number 16. By getting the expertise of Enam, an old hand in Indian investment banking business, Axis Bank will make it to the top three of the investment banking league table.
Enam is ranked third in the Bloomberg league tables for domestic equity offerings. It is behind Citi and Kotak Mahindra Capital.
This year has been a record year in terms of fund-raising. Indian companies have raised over Rs 1 lakh crore through 140 deals topping Rs 78,200 crore raised in 2007.
Axis Bank is at number 16 on the Bloomberg league table for domestic equity offerings. It has underwriten eight deals worth Rs 1,134 crore. Some of the deals done by Axis Bank include the rights issue of REI Agro, Jaypee Infratech IPO, which is second-biggest this year, and IPO of renewable energy firm Orient Green Power.
Enam has been involved in 26 such share sales this year, the most by any investment banker, and has helped companies raise more than Rs 9,500 crore. Some of the top deals done by Enam this year include the country's biggest-ever initial public offering Coal India, and two over Rs 1,000-crore real estate sector IPOs from Prestige Estates and Oberoi
Realty. Enam was also banker to the Reliance Power IPO in 2008, the second-biggest ever in the country.
Enam has consistently featured in the top five since 2007 on the Bloomberg league table on domestic equity offerings (expect in 2008, when it ranked at number 10). Since 2004, Enam has maintained an average market share of 9% and has helped Indian companies raise over Rs 36,000 crore.
With Enam, Axis will get to build the desired scale and size. However, what will be important to see is how smoothly the bank integrates the Enam's team of investment bankers and also whether it maintains to stay ahead in the race.
The key will also be to ensure profitability in a scenario where revenues from investment banking business are dwindling due to the near-zero commissions in public sector offerings.
The price Axis Bank has paid is largely for the people. Therefore, the biggest challenge will be to ensure they are retained. “It is a people-centric business and attrition of top management of Enam could be key risk for Axis Bank,” said Nilesh Parikh of Edelweiss in a report.
Over two and a half decade old indigenous investment bank, Enam Securities been a dominant player in the equity fund-raising business in India, while Axis Bank, country's third-largest private sector lender, has a strong presence in the debt market and is ranked number one as a manager of debt sales.
“Enam complements the strong corporate banking and debt capital market franchise of Axis Bank,” said Shikha Sharma, CEO, Axis Bank
“Axis Bank has a strong presence in debt market syndication. Enam will fill the missing links in the equity capital markets and investment banking,” said a merchant banker.
Source: Financial Express & MSN India