For the clients, by the clients. But merger?

“We have a lot of common clients,” Vallabh Bhansali, the face of Enam Securities and one of its four promoters, said on Wednesday.

That, perhaps, sums up the raison d’etre of the transaction between Enam Securities and Axis Bank.

The synergies are clear: Enam’s clients need funding, both on the investment banking side and the distribution side, so joining hands with an impeccable banking franchise makes eminent sense. For Axis, i-banking and institutional broking are holes in its portfolio.

Both Enam and Axis have thrived due to the backing of high-powered clients and investors, and their interest remains paramount. This transaction has to be viewed in that light. Not to forget, these clients also bring a lot of business and opportunities to the table.

The investment banking business, by construct, can’t work if customers don’t win. Ergo, customer comes first.

What comes next? Bet that Axis Securities — into which the Enam biz is merging — will go public soon to unlock value.

A standalone Enam doing so is not the same as an Enam inside Axis floating. That’s a force multiplier.

After that, expect Axis Bank to ratchet up its presence abroad at light speed from a negligible one now.

As foreign investors pump money into India in the next few decades, it makes sense to be the intermediary that captures the flows and efficiency spreads engendered.

This means Axis could also look to buy entities with regulatory licences abroad that can facilitate the process.

Indian banks will need significantly greater balance-sheet bulk to facilitate cross-border deals that will become the norm down the road, even as things like Indian depository receipt issues by foreign companies abound. With Enam, Axis has taken a baby step to the ultimate goal of universal banking.
What Axis also gets —- perhaps most importantly — is best-of-breed indigenous deal-making talent.

Co-promoter Nemish Shah is a buy-side hand, renowned for identifying stories and investment ideas.

Vallabh Bhansali’s strengths are bringing people to the table, strong relationships with investors and clients, and an ability to manage distribution of stock.  

Though not much is known of Jagdish Master (and fourth partner Manek Bhansali passed away), Manish Chokhani, who takes over as the CEO of (what may be ultimately called) Axis Securities, is a fantastic market mind, and an eloquent, much-sought speaker.

Any bank would give its right arm to have them all on board.

In the context, the 20-times valuation that Axis Bank coughs up doesn’t look expensive. Just look at the dealmaking talent and the hundreds of age-old client relationships that Enam carts in.

What is not known, however, is the future of Enam’s broking cards, since it is bound not to compete with Axis.

And what’s left is a buy-side entity and an infrastructure fund, with general insurance thrown in. One’s tempted to call it a microscopic variant of Berkshire Hathaway.

So is this a sellout by Enam?

“Unlikely,” says a peer. “These guys are not going to fade away anytime soon. They are very charged-up individuals. They may even end up leading Axis one day,” he said, tongue firmly in cheek.

Which brings us to the ‘merger’. Is it one?

While Enam is merging into Axis Securities, a 100% subsidiary, the consideration paid is in Axis Bank shares.

Were the Enam promoters to get shares of Axis Securities instead, there would not have been a capital gains issue.

But if a third party’s share is the consideration, doesn’t it tantamount to deemed income for the Enam promoters?

If that’s the case, isn’t Axis buying Enam rather than merging?

Guess it’s for the taxman to decode that one.