Axis Bank-Enam deal gets RBI nod: reports

The Reserve Bank of India has approved Axis Bank’s revised plan to acquire the broking and investment banking businesses of Enam Securities, according to media reports . The 2,067 crore share-swap deal has taken nearly 10 months to gain central bank approval.

According to Indian Express , the RBI has approved a revised share swap deal under which Axis Bank will initially merge Enam with itself and then transfer it to a subsidiary, Axis Securities and Sales Limited (ASSL).

Earlier, there had been fears the new structure would attract double taxation liabilities - one at the time of Enam’s merger with Axis Bank and the other, at the time of spinning off and merging Enam’s assets with ASSL.

“The Reserve Bank of India has now clearly worded that there will be tax liability only once and thus has given its go-ahead to the deal,” a source said.

The RBI had earlier rejected a proposal under which Enam’s promoters would be awarded shares of Axis Bank, while its (Enam’s) businesses were transferred to a bank subsidiary. On Friday, media reports said the central bank had also indicated that it wanted the Axis Bank-Enam deal to be concluded as an all-cash deal. In addition, the central bank had also taken issue with the proposal to give Vallabh Bhansali a seat on the board of Axis Bank.

Analysts said it would have been difficult for Axis Bank to go through with the deal if it was compelled to pay cash for the transaction. That’s because the same set of valuations cannot be applied for an all-cash deal and a share-swap deal. Under the share swap deal, Axis Bank planned to swap 5.7 shares of its own for every one share of Enam. It is not clear if that share swap ratio remains the same.

Axis Bank’s shares closed 4 percent lower at Rs 1,103 on Friday.