Global investment firm Bain Capital has taken a loan for $450 million from JPMorgan Chase in order to proceed with its planned investment in Axis Bank. Following completion, the investment deal between Bain Capital and Axis Bank will be the largest private equity deal in the Indian banking sector. This debt deal is likely to increase Axis Bank’s capital adequacy ratio from 16.32% to 18.66%.
Last month, Axis Bank got clearance to raise $1.8 billion from various investors in order to improve the bank’s capital base. After a string of disappointing earnings, Axis Bank was looking forward to additional investment to boost its performance in the market. The investment deal led by Bain Capital also included other investors such as Capital International and India’s largest life insurance service provider Life Insurance Corporation of India (LIC).
In this $1.8 billion deal, Bain Capital’s contribution alone would be $1.2 billion. LIC would contribute $200 million towards this deal. The debt taken from JPMorgan would be for a period of 18 months. The loan amount would be secured with the shares of Axis Bank obtained from this deal.
In most cases, private equity firms will invest in a company by using the capital amount invested by its investors. Alternatively, these firms take a bridge loan when there is urgent need for funds. Bain Capital has taken the bridge loan from JPMorgan mainly for this purpose. JPMorgan would also act as an advisor for Bain Capital in this investment deal.
The investment deal got finalized in November after Axis Bank announced that it would raise Rs.11,626 crore ($1.8 billion) in a share and warrants sale. As per the deal, Axis Bank would sell 17 crores of its shares for a price of Rs.525 each. Warrants would be sold at Rs.565 each. Following this deal, the total shares of existing Axis Bank shareholders would be diluted by about 8.23%.