HDFC Bank to buy Axis Bank stake in NSDL for $22 mn

HDFC Bank, India’s largest private-sector bank by assets, will buy a 4.95% stake in National Securities Depository Ltd (NSDL) from peer Axis Bank for Rs 163.34 crore ($22.26 million) in cash, the lenders informed stock exchanges on Friday.

Axis Bank, India’s third-largest private-sector lender by assets, will continue to hold a 0.05% stake in NSDL. It agreed to sell its stake in NSDL to HDFC Bank after terminating a February agreement to sell its entire 5% holding to an undisclosed buyer.

Axis Bank didn’t specify any reason for terminating the previous agreement. 

HDFC Bank’s stake in NSDL will increase to 9.95% when the deal closes, which is likely to happen by the end of this year.

Axis Bank also hasn’t specified any reason for selling its stake in the securities depository firm. However, the move appeared to be part of its strategy to exit non-core investments, shore up its capital base and improve asset quality.

Axis Bank had raised Rs 11,626 crore ($1.8 billion then) in November last year from institutional investors, including US-based alternative investment firm Bain Capital, state-run Life Insurance Corporation and investment management firm Capital Group.

The fund infusion followed its July-September 2017 earnings, which showed a rise in non-performing assets (NPAs). The stock had tanked 15% reacting to mounting bad loans and its earnings report.

Axis Bank is yet to announce its earnings for July-September 2018. In the first quarter (April-June), the private-sector lender saw its net profit decline 43% to Rs 701 crore compared with the same duration last year.

The quarter, however, saw the bank return to the path of profitability. It reported a loss for the time in its January-March quarterly earnings owing to a rise in bad loan provisioning. Its loss for the three months ended March 2018 stood at Rs 2,189 crore.

Shares of HDFC Bank closed at Rs 1,962.25 apiece on the BSE on Friday, down 0.37% from the previous close.

Shares of Axis Bank on the BSE closed at Rs 537.35 apiece, down 4.04% from the close on Thursday.

BSE’s benchmark Sensex fell a little more than 1% in volatile trade to close at 33,349.31 on Friday. The benchmark of top 30-shares on the BSE has lost nearly 14% since touching an all-time high on 29 August.

Axis Bank isn’t the only  investor to sell stake in NSDL. In December last year, state-owned IDBI Bank had sold 7.99 lakh NSDL shares for an undisclosed amount, the lender had informed stock exchanges. The sale was part of IDBI Bank’s efforts to sell all non-core investments.

IDBI Bank held a 30% stake, or 1.2 million shares, in NSDL as of March 2017, showed NSDL’s annual report. The National Stock Exchange (NSE), the country’s largest bourse, owned a 24% stake, the annual report showed. 

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