Axis Bank approves Enam deal; to get $57 million from unit

India's No.3 private lender Axis Bank said on Friday its board has approved the transfer of Enam Securities' investment banking and equities businesses to self, which will be eventually sold to the bank's wholly owned unit for 2.74 billion rupees ($57.6 million).

Late last year, Axis Bank had said it will buy the two units for $456 million in an all-stock transaction, but regulatory hurdles prevented the acquisition to take effect.

The structure, announced on Friday, broadly retains the original deal contours, but now involves a cash payout to Axis Bank from its own unit for transferring Enam's businesses.

"It's an accounting treatment mainly to comply with the regulations," a senior official at Enam Securities, who did not want to be named, said.

"There is no structural changes to the deal, which we had announced earlier," he added.

The Reserve Bank of India, in April, had given an in-principle approval to the deal but had asked the bank to revise its scheme of accounting and eventual structure for the new business.

It had also stipulated that no shareholder of Enam Securities acquiring shares of Axis Bank under the scheme of arrangement would be eligible for being a director on the board of the lender.

Axis had since been reviewing the deal and had in July sought some modifications to the approval granted by the central bank.

Enam shareholders will be issued 13.7 million shares on the basis of the agreed swap ratio of 5.7 shares of the bank for every one share held, Axis said in a statement.

The Enam businesses that Axis is absorbing generated pre-tax profit of 920 million rupees ($20.3 million) on operating income of 2.42 billion rupees in the fiscal year that ended in March 2010.

Axis Bank said the deal structure outlined on Friday was in accordance with the conditions prescribed by the central bank. It will again go back to the regulators for clearance.

Its shares, valued at nearly $10 billion, ended up 1.58 per cent at 1,133.35 rupees in a firm Mumbai market. ($1 = 47.560 Indian Rupees)

Source: Economic Times