MUMBAI, Nov 2 (Reuters Breakingviews) – Indian banks are having a ball, and a prince of foreign buyouts who ensured the $32 billion lender made it to the soiree is dialing back the dance.
Bain Capital on Tuesday raked in about $400 million from selling just under a third of the more than 4% stake it bought in Axis Bank ( AXBK.NS ) in 2017. At the time, the private equity firm and Life Insurance Corporation of India ( LIFI.NS) injects cash as the country’s third-biggest unregulated lender is struggling with bad loans.
Axis is now giving confidence under former HDFC Life Insurance executive Amitabh Chaudhry, who joined as boss in 2019. Gross bad loans account for 2.5% of total assets, less than half the level when Bain bought in. Annualized return on equity reached 18.9% in the latest quarter, compared to less than 3% in March 2020, supporting a valuation of 1.9 times forward book. In March the bank acquired Citi’s ( CN ) Indian retail business for $1.6 billion.
Paying for that purchase may require more capital. And the bank’s shares have soared 25% this year while international peers such as US Bancorp and Barclays ( BARC.L ) have fallen by around the same quantum. With Bain currently earning 1.6 times its money, excluding dividends, this is a good time to send some of it home to its party. (By Una Galani)
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