Is the Axis Bank-Enam merger on or off?

What’s up with the Rs2,067 crore ‘merger’ between Axis Bank and Enam Securities?

It’s two months short of a year since the deal was announced but there’s just no sign of consummation.

Is it on or is it off?

At the time of announcement on November 10 last year, the companies had set a deadline of six months to pull it all off, or by this June.

The Reserve Bank of India (RBI) had given its in-principle approval to the deal, but had specified a revised scheme of accounting and a change in the eventual structure of the institutional broking business of Enam.

“Upon examining the implications of these conditions, Axis had sought certain modifications to the approval granted by the RBI. Pending receipt of the approvals, no effect of the acquisition has been given to the financials for the quarter ended June 30, 2011,” the bank said in a statement after its June-quarter results.

The conditions, apparently, had a negative tax implication and Axis has been weighing ways around the problem.

“The issue has been settled,” an official very close to Enam had told DNA more than three weeks back.

Axis and Enam officials were not available for comment.

“It’ll be good if the companies came out with a statement clarifying the situation,” said a banking analyst with a foreign brokerage, who asked he be not named since he’s not authorised to speak to the media.

Earlier, the RBI had also frowned at Axis’ plan to induct Vallabh Bhansali, the chairman and co-founder of Enam, as an independent director.

As part of the deal, Axis had said Enam would demerge its equities and investment banking businesses into its wholly owned subsidiary.

The bank was to also spin its own investment banking business into this subsidiary.

Talk on the street is that Axis may now be trying to wriggle out, but DNA could not independently confirm this with the bank.

Under their merger deal, Axis was to swap 5.7 of own shares for one of Enam, valuing the businesses of the closely held brokerage at Rs2,067 crore.

The total consideration includes the brand, the people, the business, the clients etc.

“If the deal falls through, it will be good for Axis since it is seen expensive for the bank,” said an analyst with a domestic brokerage firm, also requesting he be not identified.

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