MUMBAI (Reuters Breakingviews) – Indian banks are having fun, and a foreign takeover prince who secured a $32 billion lender to the party is looking back at the dance.
Bain Capital pocketed some $400 million on Tuesday by selling just under a third of the more than 4% stake it bought in Axis Bank in 2017. At the time, the private equity firm and Life Insurance Corporation of India injected cash as the third largest in the country. non-state-controlled lender was struggling with a slew of bad debts.
Axis now exudes confidence under former HDFC Life Insurance executive Amitabh Chaudhry, who joined as boss in 2019. Gross bad debt is 2.5% of total assets, less than half the level when Bain bought. The annualized return on equity reached 18.9% in the most recent quarter, compared to less than 3% in March 2020, which underlies a valuation of 1.9 times the forecast value. In March, the bank acquired Citi’s Indian retail business for $1.6 billion.
Paying for this purchase probably requires raising more capital. And the bank’s shares have jumped 25% this year, while international peers like US Bancorp and Barclays have fallen by around the same amount. With Bain currently sitting on 1.6 times his money, excluding dividends, now is a good time to send some to his party house. (By Una Galani)
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