Axis Bank Eyes Higher Valuation for Axis Finance Stake Sale After RBI Eases Rules

Axis Bank has commenced the revaluation of its non-banking finance company, Axis Finance. This strategic move comes after the Reserve Bank of India (RBI) relaxed regulations that previously restricted overlapping business activities between banks and their group entities. The easing of these norms is anticipated to significantly improve the valuations for businesses majority-owned by banks.

Originally, Axis Bank intended to divest a 20% stake in Axis Finance. However, influenced by the improved business prospects and regulatory environment, the bank now plans to sell more than 26% of the subsidiary. Axis Bank had previously targeted a valuation between $1 billion and $1.5 billion for Axis Finance and had received two bids from private equity investors in late September. Following the revaluation, fresh expressions of interest are expected to be invited.

**Impact**

This development is positive for Axis Bank as it can now potentially route more business through its NBFC subsidiary, leading to better financial performance and higher valuations. The increased stake sale and potential future IPO of Axis Finance could unlock significant value for the bank and its shareholders. The market is likely to view this favorably, as it demonstrates strategic capital management and growth initiatives within the banking group. Rating: 7/10

**Definitions**

* **Initial Public Offering (IPO)**: This is the process by which a private company can become public by selling shares to the public for the first time, usually on a stock exchange. * **Non-Banking Finance Company (NBFC)**: A financial institution that provides banking-like services but does not hold a full banking license. They are regulated by the RBI but operate under different rules than traditional banks. * **Private Equity Investors**: Investment firms that pool money to invest in private companies or conduct buyouts of public companies. * **Assets Under Management (AUM)**: The total market value of all financial assets that a person or entity manages on behalf of clients. * **Gross Non-Performing Assets (NPA) Ratio**: The ratio of a bank's gross NPAs to its total loans. NPAs are loans on which interest or principal repayment has not been received for a specified period.