Axis Bank buys chunk of Enam for Rs2,067 crore

In a deal that is said to have been hammered out in a little over 75 days, Axis Securities, the equities arm of Axis Bank, will merge with the investment banking business of Enam Securities.

Axis will swap 5.7 of own shares for one of Enam, valuing the businesses of the closely held firm at Rs2,067 crore.

The deal is expected to be concluded in the next six months and will need the approvals of the Bombay and Gujarat high courts.

The four promoters of Enam - Vallabh Bhansali, the family of late Manek Bhansali, Nemish Shah and Jagdish Master, along with director Manish Chokhani, will end up holding 3.3% stake in the expanded equity of Axis Bank.
Anil Singhvi, former chairman of Gujarat Ambuja Cement, played a key role in the transaction from Enam’s side, while the Macquarie Group advised Axis.

As per the deal, Enam will demerge its investment banking, institutional equities, retail equities and distribution of financial products, and non-banking finance businesses and merge them with Axis Securities.

The transaction, Axis’s first in the financial-services industry, may help strengthen its equities unit, Brian Hunsaker, an analyst at Keefe, Bruyette & Woods Asia Ltd, told Bloomberg.

“The financial-supermarket model of business which has been discredited in the West seems to be alive and well in India,” Hunsaker said over phone from Hong Kong. “All these Indian financial institutions seem to want to get into each other’s businesses.”

The merged entity will be headed by Manish Chokhani, while Jagdish Master, a founder-promoter of Enam, will be a board member. Vallabh Bhansali, co-promoter of Enam, will be an independent director of Axis.

“This was needed for a great combination of corporate and commercial banking,” said Shikha Sharma, managing director and chief executive officer of Axis Bank.

The newly created subsidiary is expected to benefit from the investment banking and equities franchise of Enam Securities and the dominant debt capital markets and commercial banking franchise of Axis Bank.

“The total consideration is of Rs2,067 crore, which includes the brand, the people, the business, the clients etc. We have not allocated values to specific parts,” said Sharma. The value of net current assets of Enam is Rs300 crore. This will be transferred to Axis.

As of October, the total income of the part of Enam meant to be merged was Rs182 crore, while it was Rs242 crore for the financial year 2010.

The profit before tax was Rs77 crores as on October, while it was Rs92 crores for the financial year 2010 — referred to as an ‘impacted year’ on account of the financial crisis.

While Enam will not compete for the sell side business for a period of 5 years, the buy side business of Enam, which includes asset management and portfolio management services, will remain separate.

The board of Axis Bank has proposed to induct Vallabh Bhansali, the co-founder and chairman of Enam, as an independent director.

Enam has 450 employees and is spread across 12 cities. Enam Institutional Equities has over 200 active clients across the world.

With a market capitalisation of Rs61,420 crores and a customer base of over 150 lakhs, Axis Bank offers services like corporate banking, small medium enterprise banking, agri-business banking, retail banking and international banking through its 1,100 branches in India.