Chirag Rajendra Shah

K. J. Somaiya Institute of Management

Studies & Research, Mumbai.

Axis Bank
Equity Research Report

COMPANY INFORMATION:
Axis Bank is the third-largest Indian bank offering a wide assortment of financial products. The bank
has its head office in Mumbai, Maharashtra. It has 4,800 branches, 17,801 ATMs and 4,917 cash
recyclers spread across the country as of 31 March 2020 and nine international offices. The bank
employs over 1,30,000 people and had a market capitalization of ₹2.31 trillion (US$32 billion) (as on
31 March 2020). It sells financial services to large and mid-size corporates, SME and retail
businesses. Axis Bank Ltd. has been promoted by the largest and the best Financial Institution of the
country, UTI.The Bank has strengths in both retail and corporate banking and is committed to
adopting the best industry practices internationally in order to achieve excellence. Services offered
by the bank include Personal Banking, Corporate Banking, NRI Banking, Priority Banking, VBV -
Online purchases using Credit Card and VBV / MSC - Online purchases using Debit Card.

Founded: 1993
Industry Name: BANKS - PRIVATE SECTOR
House Name: Public Sector
Traded as- REGISTERED CORPORATE OFFICE:
BSE: 532215
Address:
NSE: AxisAXISBANK
Bank Limited, ‘Axis House’,
ISIN: C-2, Wadia International Centre, Pandurang Budhkar Marg, Worli, Mumbai - 400 025
INE238A01034
Tel. No.:
Headquarters: +91-22-24252525/43252525
Mumbai, Maharashtra, India.
Fax: +91-22-24251800
Email: customer.service@axisbank.com
Website: http://www.axisbank.com

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JOURNEY SO FAR:

Incorporated as UTI Bank

1993

Launched first branch in Ahmedabad, inaugurated by Dr. Manmohan Singh, Union

1994 Finance Minister

Public issue was oversubscribed by 1.2 times with over 1 lakh retail investors
1998

Appointed Dr. P. J. Nayak as Chairman and MD who took over from Mr. Supriya Gupta
2000

UTI Bank enlisted on the London Stock Exchange, raised USD 239.30 million through
2005 Global Depositary Receipts (GDRs)

UTI Bank changes its name to Axis Bank, launches its new logo and a national ad
2007 campaign

Appointed Ms. Shikha Sharma as MD and CEO of Axis Bank, taking over from Dr. P. J.
2009 Nayak

Acquired the investment banking and equity capital market business of Enam Securities
2010

Launched overseas subsidiary, Axis Bank UK Limited, to commence banking operations in

2013 the United Kingdom

Introduced Burgundy, Wealth Management Services

2015

Concluded the issue of USD 500 million, Asia’s first certified Green Bond by a bank
2016

Amitabh Chaudhry takes over as MD & CEO from 1 Jan, 2019

2019

Global view of Banking Industry

It is expected that most banks globally to be able to buffer challenging credit conditions in 2020. But
there are downside risks that could disturb the relative calm. A scenario of slower economic
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growth--primarily driven by the U.S.-China trade and strategic confrontation--and a weaker outlook
for corporate earnings may ultimately take its toll on bank asset quality and test ratings at current
levels. Moreover, our current expectations at this late stage of what has been an extraordinarily long
credit cycle is that the negative turn we anticipate--whether in 2020 or now punted further afield
following recent dovish sentiment by central banks--will be orderly; i.e., relatively moderate and
gradual. A significant and abrupt cyclical downturn affecting bank credit could cause a negative step
change in our view. While not our base case, this adverse scenario is far from implausible noting the
high volume of credit working its way through and around the global banking system.

Banking Industry in India:

India will go through a tug of war on economy, resolution of bad loans, and health of non-bank
finance companies. The Indian economy has cooled off in recent quarters due to weak private
consumption, and is likely to remain soft in fiscal year 2020. The government's fiscal push in the form
of corporate tax cuts and income transfer to farmers and Reserve Bank of India's (RBI) policy rate
cuts and its transmission may lead to some recovery. It is expected that GDP growth will be of 6.3%
in fiscal 2020 and 7% in fiscal 2021. Although legacy stress has been recognized and government
capital infusions have increased provision levels, credit risk remains high. Private sector banks and
top-tier public sector banks with better franchises, profitability, and capitalization are likely to
increase their market share.

SUBSIDIARIES:
I. Axis Finance Ltd.
 A non-banking finance company regulated by RBI, Axis Finance Ltd. offers loans
against securities, real estate funding, structured funding and IPO funding among
others
 Enjoys the highest credit rating: AAA from CRISIL and A1+ from India Ratings
 Profitability matrix has grown significantly while maintaining healthy capital ratios

II. Axis Capital Ltd.

 Provides services related to investment banking, equity capital markets, institutional
stock broking, mergers and acquisitions advisory
 Axis Capital Ltd. has won the ‘Best Investment Bank’ in India for the 4th year in a
row

III. A.Treds Ltd.

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  Engaged in the business of operating institutional mechanism to facilitate financing
of trade receivables of micro, small and medium enterprises through multiple
financiers

IV. Axis Asset Management Company Ltd.

 Axis Asset Management Company Ltd. undertakes the activities of managing the
mutual fund business and portfolio management business
 Added 1.2 million investors in last one year, taking the overall investor folios to 3.9
million
 Average AUM has grown at 43% CAGR in last 5 years, highest in the industry

V. Axis Trustee Services Ltd.

 Axis Trustee Services Ltd. is a registered debenture trustee as per SEBI (Debenture
Trustee) Regulation, 1993 and is engaged in trusteeship activities, acting as
debenture trustee and as trustee to various securitisation trusts
 Assets under custody stood at `1,855,099 crores as on 31 March, 2019

VI. Axis Securities Ltd.

 Axis Securities Ltd. is primarily in the business of marketing of credit cards and retail
asset products; and also provides retail broking services
 Has one of the highest mobile adoption industry rates with over 64% volumes
emanating from mobile
 Sourced retail assets of `34,430 crores and 15.50 lakhs credit cards for Axis Bank
during 2018-19

VII. Freecharge Payment Technologies Private Ltd. and Accelyst Solutions

Private Ltd.
 Provides digital payments and digital financial service platform, which helps Bank
acquire young, digital native customers, through co-created financial service
offerings
 FreeCharge continues to act as an engine that attracts digitally native customers and
creates a significant cross-sell base for the Bank
 15 million new users registered since acquisition by Axis Bank

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VIII. Axis Bank Foundation
 Established to strengthen our community development objectives
 Responsive to the requirements of marginalised communities with a strong focus on
strengthening the role of women in the rural economy
 Many of the Foundation’s programmes are closely aligned with various rural
development initiatives

COMPANY MANAGEMENT:
Board of Directors:
Name Designation
Dr. Sanjiv Misra Chairman
Amitabh Chaudhry Managing Director & CEO
Prof. Samir Barua Independent Director
Rohit Bhagat Independent Director
Som Mittal Independent Director
S. Vishvanathan Independent Director
Rakesh Makhija Independent Director
Ketaki Bhagwati Independent Director
Girish Paranjpe Independent Director
Usha Sangwan Nominee Director
B. Babu Rao Nominee Director
Stephen Pagliuca Nominee Director
Rajiv Anand Executive Director (Wholesale Banking)
Rajesh Dahiya Executive Director (Corporate Centre)

Key Management Personnel:

Name Designation
Jairam Sridharan Group Executive and Chief Financial Officer
Ganesh Sankaran Group Executive - Wholesale Banking Coverage Group
Pralay Mondal Group Executive - Retail Banking
Dr. Raju Mistry President & Global Chief People Officer
Ravi Narayanan President - Branch Banking
Sanjay Silas President - International Banking
Rajendra Adsul President - International Banking
Akshaya Kumar Panda President - Large Corporate Coverage

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Prashant Joshi President - Large Corporate Credit
Himadri Chatterjee President - Retail & Wholesale Banking Operations
J P Singh President - Commercial Banking Group
Rudrapriyo Ray President & Chief Compliance Officer
Cyril Anand President & Chief Risk Officer
Girish V. Koliyote Company Secretary

FINANCIALS OF THE COMPANY:

Balance Sheet
Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Equity Share 4 4 4 51 51
Capital 74.10 76.57 79.01 3.31 4.33
Reserves 44,4 53,0 55,9 63,69 67,28
75.49 82.19 01.34 4.10 8.29
Borrowings 406,6 472,1 527,4 611,42 711,99
37.67 49.92 37.44 4.85 5.77
Other Liabilities 15,7 20,8 27,7 28,21 34,33
01.63 53.27 37.34 0.38 7.53
Total 467,2 546,5 611,5 703,84 814,13
88.89 61.95 55.13 2.64 5.92

Net Block 2,44 3,3 3,5 3,697 3,84

6.72 57.87 18.14 .03 2.12
Capital Work in 1 2 2 35 28
Progress 05.18 15.89 92.10 1.79 7.76
Investments 118,5 131,3 129,0 153,03 174,05
26.63 98.64 18.35 6.71 5.85
Other Assets 346,2 411,5 478,7 546,75 635,95
10.36 89.55 26.54 7.11 0.19
Total 467,2 546,5 611,5 703,84 814,13
88.89 61.95 55.13 2.64 5.92

Working
Capital 330,508.73 390,736.28 450,989.20 518,546.73 601,612.66
Debtors
- - - - -
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Inventory
- - - - -
   
Debtor Days
- - - - -
Inventory
Turnover - - - - -

Profit & Loss Account

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Sales
35,727.46 41,409.25 45,175.09 46,614.06 56,043.65
Expenses
11,517.77 13,868.65 24,322.98 29,699.82 27,994.94
Operating Profit
24,209.69 27,540.60 20,852.11 16,914.24 28,048.71
Other Income
8,834.46 9,954.98 12,417.72 11,845.91 14,163.98
Depreciation
419.64 461.39 526.67 590.58 737.17
Interest
21,341.26 24,344.23 26,789.35 27,603.69 33,883.47
Profit before tax
11,283.25 12,689.96 5,953.81 565.88 7,592.05
Tax
3,834.76 4,332.38 1,986.78 101.86 2,544.96
Net profit
7,447.90 8,349.67 3,953.03 455.82 5,038.59
EPS
31.42 35.04 16.51 1.78 19.59
Price to earning
17.83 12.67 29.74 287.44 39.67
Price
560.20 444.15 490.80 510.50 777.25
   
RATIOS:  
Dividend Payout 14.64% 14.27% 30.29% 0.00% 5.10%
OPM 67.76% 66.51% 46.16% 36.29% 50.05%

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Cash Flow Statement:
Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Cash from Operating
Activity -15,162.50 -34,494.68 32,208.62 -38,390.30 37,125.25
Cash from Investing
Activity -7,972.38 9,210.70 -12,458.40 -10,007.10 -18,674.35
Cash from Financing
Activity 31,044.82 22,494.69 -2,486.91 41,342.09 5,642.60
Net Cash Flow
7,909.94 -2,789.29 17,263.31 -7,055.30 24,093.50

SHARE HOLDING PATTERN:

Share holding pattern:
Standalone Mar-20 Sep-19 Jun-19 Mar-19
Promoters 15.75 16.23 17.64 18.2
Pledged 0 0 0 0
FII/FPI 44.55 47.09 47.03 48.32
Total DII 32.82 29.56 27.84 25.85
Fin.Insts 0.11 0.13 0.1 0.1
Insurance Co 2.17 1.99 1.93 2.08
MF 20.18 17.87 15.41 14.94
Others DIIs 10.36 9.57 10.4 8.73
Others 6.87 7.13 7.48 7.63
Total 99.99 100.01 99.99 100

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DIVIDEND & RIGHTS:
Dividend:
Announcement Date Effective Date Dividend Type Dividend (%)

25-04-19 04-07-19 Final 50

28-04-17 06-07-17 Final 250

26-04-16 07-07-16 Final 250

29-04-15 09-07-15 Final 230

Split:
Announcement Date Old FV New FV Ex-Split Date

25-04-14 10 2 28-07-14

RATIOS:
2020 2019 2018 2017 2016
Basic EPS (Rs.) 6.83 19.61 1.86 16.54 35.12

Diluted EPS (Rs.) 6.8 19.49 1.86 16.48 34.93

Cash EPS (Rs.) 6.66 22.49 4.11 18.76 37.01

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Book Value 301.05 263.65 250.17 235.41 224.7
[ExclRevalReserve]/Shar 7
e (Rs.)

Book Value 301.05 263.65 250.17 235.41 224.7

[InclRevalReserve]/Share 7
(Rs.)

Operating Revenue Per 225.81 217.93 181.62 188.62 173.7

Share 8

Net Profit/Share (Rs.) 6.66 19.63 1.81 16.56 35.07

NP After MI And SOA / 6.57 19.59 1.78 16.51 35.04

Share (Rs.)

Key Performance Ratios:

2020 2019 2018 2017 2016
ROCE (%) 2.74 2.51 2.38 3.09 3.17
CASA (%) 0 44.18 53.48 51.22 47.25
Net Profit Margin 2.94 9 0.99 8.78 20.18
(%)
Net Profit After MI 2.9 8.99 0.97 8.75 20.16
And SOA Margin
(%)

Operating Profit -22.69 -16.31 -24.45 -18.71 -3.85

Margin (%)

Return On Assets 0.2 0.61 0.06 0.64 1.56

(%)
Return On 2.18 7.43 0.7 7.01 15.58
Equity/Networth
(%)
Net Interest 2.81 2.72 2.7 3 3.2
Margin (%)
Cost To Income 50.19 44.56 52 46.6 36.33
(%)

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Interest 6.96 6.88 6.62 7.38 7.78
Income/Total
Assets (%)
Non-Interest 1.78 1.74 1.68 2.03 1.87
Income/Total
Assets (%)
Operating -1.58 -1.12 -1.61 -1.38 -0.3
Profit/Total
Assets (%)
Operating 1.97 2.05 2.1 2.08 1.99
Expenses/Total
Assets (%)

Interest 4.15 4.16 3.92 4.38 4.57

Expenses/Total
Assets (%)

Valuation Ratio:
2020 2019 2018 2017 2016
Enterprise 810,126.91 876,482.09 706,683.29 614,127.86 546,363.57
Value
(Rs.Cr)
EV Per Net 12.71 15.64 15.16 13.59 13.19
Sales (X)
Price To 1.26 2.94 2.04 2.08 1.98
Book Value
(X)
Price To 1.68 3.56 2.8 2.6 2.56
Sales (X)
Retention 100 99.46 -219.73 63.46 99.62
Ratios (%)
Earnings 0.02 0.03 0 0.03 0.08
Yield (X)

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18%

16%

14%

12%

10%
ROE
8% ROCE

6%

4%

2%

0%
2015 2016 2017 2018 2019

Peer Comparison:

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PEER COMPANIES IN THE INDUSTRY:
1. HDFC Bank
2. Kotak Mahindra
3. ICICI Bank
4. Bandhan Bank
5. Yes Bank
6. IndusInd Bank
7. AU Small Financ
8. IDFC First Bank
9. City Union Bank
10. Federal Bank
11. RBL Bank
12. DCB Bank
13. CSB Bank
14. Karur Vysya
15. Karnataka Bank
16. South Ind Bk
17. JK Bank
18. Lakshmi Vilas
19. Dhanlaxmi Bank

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TECHNICALS:

50
51
EFFECT OF COVID-19:
Banks in the country are likely to witness a spike in their non-performing assets ratio by 1.9 per cent
and credit cost ratios by 130 basis point in 2020, following the economic slowdown on account of
COVID-19 crisis. For Asia-Pacific Banks, COVID-19 Crisis Could Add USD 300 Billion to Credit Costs.
The NPA ratio in India is likely to fare similarly to China's (1.9 per cent 2 per cent) but the credit costs
ratios could be worse, increasing by about 130 basis points. This will deepen the economic pain we
already anticipate for 2020. Financing conditions may likewise sour as investors become more risk
averse. This would hit bank credit.

Banks face a second-order hit compared with the corporate and household sectors. The report said
the economic storm created by COVID-19 will test the ratings resilience of the region's 20 banking
sectors.

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OPINION:
Axis Bank reported a loss of Rs 1,388 crore for the March quarter as the lender provided an extra Rs
3,000 crore due to the disruption from the pandemic. Total provisions for Q4FY20 jumped to Rs
7,730 crore, up 122% sequentially. In Q4FY19, the private sector lender had reported a profit of Rs
1,505 crore.

Amitabh Chaudhry, MD & CEO, Axis Bank, said the lender would stay conservative, sacrificing growth
if required. Based on RBI directions, they needed to make provisions of Rs 560 crore but they have
put aside Rs 3,000 crore on account of Covid-19.

My Recommendation:
Considering the present situation I would recommend investors who have already invested in this
stock to HOLD their position and wait for the pandemic to end to get some gains for their
investments. New investors are recommended not to enter this script for a long term purpose and
instead opt for its peers who have been performing a lot better than this bank.

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