Bain Capital is currently in talks with Axis Bank to invest close to $1 billion (Rs.6,400 crore) in a historic move that could be the largest private equity (PE) investment in banking in India. Axis Bank, India’s largest private lender, is currently reeling under regulatory glare and bad asset quality issues.
The investment from Bain will be in the form of share issuance through preferential allotment. As a result of this, the PE fund will own up to 5% of the bank. There are also talks of a secondary deal through which Bain will take hold of an additional 5% stake in the company from the existing investors. This could take the total investment of Bain to $1.5 billion. The proposed deal will first have to be authorised by the Reserve Bank of India, and the transaction is expected to be completed in a few weeks from now.
The investment will assist Axis Bank in meeting capital requirements for the immediate and medium term. JPMorgan is known to be working with the bank for the transaction.
Private lenders have been attracting capital investments from foreign private companies on a regular basis. The investment sector in India has recently seen Canadian companies like Caisse de dépôt et placement du Québec (CDPQ) and Canada Pension Plan Investment Board (CPPIB) buy stakes in private lenders in India like Kotak Mahindra Bank.
On the subject of bad loans, Axis Bank has clarified that the issues are temporary and the lender will bounce back into the normal credit cost cycle by 2018.
The private equity investments in India during the first 9 months of this year was $17.6 billion, a new record. This exceeds the previous high of $17.3 billion seen in the year 2015. The number of PE investments in the banking and financial sector has also been the highest this year.