AXIS BANK LIMITED IPO

Axis Bank - Company Profile

Axis Bank, formerly UTI Bank was first of the new private banks in India to start operations after the Government of India allowed new banks to be established in the private sector. The Bank has been promoted by the largest financial institutions of the country, UTI, LIC, GIC and its subsidiaries. As at March 31, 2014, the Bank had a distribution network encompassing 2,402 domestic branches and extension counters and 12,922 ATMs situated in 1,636 cities and towns, compared to 1,947 domestic branches and extension counters, and 11,245 ATMs situated in 1,363 cities and towns last year. The Bank also has overseas offices in Singa- pore, Hong Kong, Shanghai, Colombo, Dubai and Abu Dhabi. For FY 2014, Axis Bank’s net interest margins stood at 3.81% (3.70 % for FY 2013). For the same period, net NPA’s stood at 0.40 % (0.32 % for FY 2013).

40.34% of the Bank’ operating revenue came from non-funded segments such as fees and commissions for services. 39 % of total deposits with the Bank were in the form of low cost CASA (current account and savings accounts) deposits on which the Bank pays a lower rate of interest which helps the Bank in maintaining a high rate of net interest margins.

Axis Bank - STOCK INFORMATION

Axis Bank - STOCK FUNDAMENTALS

INVESTMENT RATIONALE

Axis bank reported strong core performance on back of strong NIM (3.93%) and healthy loan growth (23.2% YoY). Although operating profit came strong at 26.8% YoY on back of healthy revenue growth along with containment of opex (C/I ratio fell by 110bps QoQ), PAT (18.4% YoY) grew at moderate pace (in-line with our expectations) due to higher pro- visions (2.5x YoY). Reported NIM came at 3.93% in Q3FY15, much ahead of management's medium term guidance of ~3.50%, largely aided by improvement in LDR (410bps QoQ)

SHAREHOLDING PATTERN

OUTLOOK AND VALUATION

Although headline NPLs have been holding well contrary to street expectations, high exposure to non-operational power portfolio remains a potential risk, in our view. Fresh impairment (Rs.8.4 bn) remained way below the management's guidance (Rs.65 bn for FY15). However, management has maintained its earlier guidance by factoring in higher restructuring during Q4FY15 (Rs.20-21 bn in Q4FY15), as provisioning arbitrage ends between NPA and restructuring post FY15. At CMP, stock trades reasonable at 2.3x its FY17E ABV with healthy return ratios (RoE: 18- 19%, RoA: 1.8%). We are retaining BUY rating on the stock with revised TP of Rs.630-650.

RESULTS (Quarterly )(Rs CR.)

TECHNICAL VIEW

AXIS BANK LTD is looking strong on charts. We advise to buy around 610-620with stoploss of 590 for the targets of 650 levels. RSI is also showing upside momentum in it on daily charts.

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