Axis Bank Q4 FY12 Detailed Reportbreport.myiris.com/firstcall/UTIBANK_20120707.pdf ·  · 2012-07-09ICICI Bank 935.20 1078272.60 56.07 16.68 1.79 165.00 SBI Bank 2218.00 1488377.50

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SYNOPSIS

Axis Bank is the 3rd largest private

sector bank in India which offers

services to customer segments covering

large and Mid-Corporates, SME,

Agriculture & Retail Business.

Bank’s Capital Adequacy Ratio

registered at 13.66% as on 31.03.12.

Net Income and PAT of the company

are expected to grow at a CAGR of 26%

and 19% over 2011 to 2014E

respectively.

AXIS Bank Ltd has recommended a

dividend of Rs. 16 per share (160%) for

the year ended March 31, 2012.

Axis Bank has reached an agreement to

sell 25 per cent of the share capital Axis

Asset Management Company Ltd (Axis

AMC) to Schorder Singapore Holdings

Pvt Ltd.

AXIS Bank Ltd has allotted 2,89,831

equity shares of Rs. 10/- each, under

ESOP Scheme of the Bank.

Years Net Income Operating Profit Net Profit EPS P/E

FY 12 219946.50 134379.70 42422.10 102.67 10.11

FY 13E 263935.80 157863.14 50044.11 121.11 8.57

FY 14E 306165.53 180026.14 57732.52 139.72 7.43

Stock Data:

Sector: Banking

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 1367.10/784.50

Volume (2 wk. Avg.) 2918000

BSE Code 532215

Market Cap (Rs in mn) 428715.66

Share Holding Pattern

1 Year Comparative Graph

AXIS BANK BSE SENSEX

C.M.P: Rs. 1037.55 Target Price: Rs. 1172.00 Date: July 07th 2012 BUY

Axis Bank Ltd Result Update: Q4 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market Cap.

(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Axis Bank Ltd. 1037.55 428715.66 102.67 10.11 1.88 160.00

HDFC Bank 583.30 1374207.80 21.93 26.60 4.59 215.00

ICICI Bank 935.20 1078272.60 56.07 16.68 1.79 165.00

SBI Bank 2218.00 1488377.50 174.46 12.71 1.77 350.00

Investment Highlights

Q4 FY12 Results Update

Axis Bank Ltd has reported net profit of Rs 12772.70 million for the quarter ended

on March 31, 2012 as against Rs 10201.10 million in the same quarter last year,

an increase of 25.21%. It has reported Net Income of Rs 60603.20 million for the

quarter ended on March 31, 2012 as against Rs 43666.60 million in the same

quarter last year, a rise of 38.79%. Total income grew by 31.47% to Rs 76479.40

million from Rs.58170.60 million in the same quarter last year. During the quarter,

it reported earnings of Rs 30.91 a share.

Quarterly Results - Standalone (Rs in mn)

As At Mar-12 Mar-11 %change

Net Income 60603.20 43666.60 38.79%

PAT 12772.70 10201.10 25.21%

Basic EPS 30.91 24.85 24.41%

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� Segment wise Revenue

Particulars (Rs.mn.) Q4 FY12

Wholesale Banking 40109.30

Treasury Operations 21155.10

Retailing Banking 71150.30

Other Banking Operations 9041.60

Total 141456.30

� Recommends Dividend

AXIS Bank Ltd has recommended a dividend of Rs. 16 per share (160%) for the

year ended March 31, 2012.

� Allotment of Equity Shares Under ESOP

AXIS Bank Ltd has allotted 2,89,831 equity shares of Rs. 10/- each, under ESOP

Scheme of the Bank. The paid up share capital of the Bank will accordingly get

increased to 41,42,90,946 equity shares from 41,40,01,115 equity shares.

� Axis Bank inducts Schorders as a 25% partner in Axis AMC

Axis Bank has reached an agreement to sell 25 per cent of the share capital of its

wholly owned subsidiary, Axis Asset Management Company Ltd (Axis AMC) to

Schorder Singapore Holdings Pvt Ltd, a wholly owned subsidiary of Schorders.

Schorders is a global asset management company with £ 187.3 billion under

management as at 31 December 2011.

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Company Profile

Axis Bank established in 1993 was the first of the new private banks to have begun

operations in 1994 after the Government of India allowed new private banks to be

established. The Bank was promoted jointly by the Administrator of the specified

undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India

(LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance

companies, i.e. National Insurance Company Ltd., The New India Assurance Company

Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd.

The Bank as on 30th June, 2011 is capitalized to the extent of Rs. 411.88 crores with

the public holding (other than promoters and GDRs) at 52.87%.

Axis Bank Ltd. has been promoted by the largest and the best Financial Institution of

the country, UTI. The Bank was set up with a capital of Rs. 115 crore, with UTI

contributing Rs. 100 crore, LIC - Rs. 7.5 crore and GIC and its four subsidiaries

contributing Rs. 1.5 crore each.

Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act, 1963,

with a view to encourage savings and investment. In December 2002, the UTI Act,

1963 was repealed with the passage of Unit Trust of India (Transfer of Undertaking

and Repeal) Act, 2002 by the Parliament, paving the way for the bifurcation of UTI into

2 entities, UTI-I and UTI-II with effect from 1st February 2003. In accordance with the

Act, the Undertaking specified as UTI I has been transferred and vested in the

Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), who

manages assured return schemes along with 6.75% US-64 Bonds, 6.60% ARS Bonds

with a Unit Capital of over Rs. 14167.59 crores.

The Bank's Registered Office is at Ahmedabad and its Central Office is located at

Mumbai. The Bank has a very wide network of more than 1281 branches (including

169 Service Branches/CPCs as on 31st March, 2011). The Bank has a network of over

6270 ATMs (as on 31st March, 2011) providing 24 hrs a day banking convenience to

its customers. This is one of the largest ATM networks in the country.

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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.

Axis Bank entered a deal in November 2010 to buy the investment banking and

equities units of Enam Securities for $456 million. Axis Securities, the equities arm of

Axis Bank, will merge with the investment banking business of Enam Securities. As

per the deal; Enam will demerge its investment banking, institutional equities, retail

equities and distribution of financial products, and non-banking finance businesses

and merge them with Axis Securities.

Services offered by the bank:

• Personal Banking

• Corporate Banking

• NRI Banking

• Priority Banking

• VBV - Online purchases using Credit Card

• VBV / MSC - Online purchases using Debit Card

International Presence

• Branches at Singapore, Hong Kong, DIFC - Dubai and Colombo

• Representative offices at Shanghai, Dubai and Abu Dhabi

• Axis U.K. Ltd. incorporated as a subsidiary

• Total assets overseas amounted to US$ 6.35 billion as compared to US$ 5.30

billion as at end March ‟11, a growth of 20%YOY • Corporate Banking, Trade Finance products, Debt Syndication and Liability

businesses

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY11 FY12 FY13E FY 14E

Description 12m 12m 12m 12m

Net Income 151548.10 219946.50 263935.80 306165.53

Other Income 46321.30 54202.20 61790.51 67969.56

Total income 197869.40 274148.70 325726.31 374135.09

Interest Expended -85918.20 -139769.00 -167863.17 -194108.94

Net Interest Income 111951.20 134379.70 157863.14 180026.14

Operating Expenses -47794.30 -60071.00 -71526.60 -81440.03

Operating Profit 64156.90 74308.70 86336.54 98586.11

Provisions and Contingencies -12800.30 -11430.30 -12087.12 -13309.13

Profit Before Tax 51356.60 62878.40 74249.42 85276.99

Tax -17471.70 -20456.30 -24205.31 -27544.47

Profit After Tax 33884.90 42422.10 50044.11 57732.52

Equity Capital 4105.50 4132.00 4132.00 4132.00

Reserves 185882.80 223953.40 273997.51 331730.03

Face Value (Rs.) 10.00 10.00 10.00 10.00

EPS 82.54 102.67 121.11 139.72

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E

Description 3m 3m 3m 3m

Net Income 52759.70 57769.60 60603.20 65451.46

Other Income 12349.20 14298.10 15876.20 13812.29

Total income 65108.90 72067.70 76479.40 79263.75

Interest Expended -32687.10 -36366.60 -39142.30 -41561.67

Net Interest Income 32421.80 35701.10 37337.10 37702.08

Operating Expenses -14665.40 -15109.10 -16961.60 -17802.80

Operating Profit 17756.40 20592.00 20375.50 19899.28

Provisions and Contingencies -4055.80 -4223.30 -1392.80 -2825.70

Profit Before Tax 13700.60 16368.70 18982.70 17073.58

Tax -4497.40 -5346.00 -6210.00 -5548.91

Profit After Tax 9203.20 11022.70 12772.70 11524.67

Equity Capital 4123.30 4125.70 4132.00 4132.00

Face Value (Rs.) 10.00 10.00 10.00 10.00

EPS 22.32 26.72 30.91 27.89

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Key Ratios

Particulars FY11 FY12 FY13E FY14E

No. of Shares (In Millions) 410.55 413.20 413.20 413.20

Operating Profit Margin (%) 42.33% 33.78% 32.71% 32.20%

PAT Margin (%) 22.36% 19.29% 18.96% 18.86%

P/E Ratio (x) 12.57 10.11 8.57 7.43

ROE (%) 17.84% 18.60% 17.99% 17.19%

ROCE (%) 4.92% 4.60% 4.61% 4.54%

Debt-Equity Ratio 11.34 11.14 10.51 10.01

Book Value (Rs.) 462.77 552.00 673.11 812.83

P/BV (x) 2.24 1.88 1.54 1.28

Charts:

NII & PAT

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P/E (x)

ROE & ROCE

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Debt Equity Ratio

P/BV

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Outlook and Conclusion

At the current market price of Rs.1037.55, the stock is trading at 8.57 x FY13E

and 7.43 x FY14E respectively.

Earning per share (EPS) of the company for the earnings for FY13E and FY14E

is seen at Rs.121.11 and Rs.139.72 respectively.

Net Income and PAT of the company are expected to grow at a CAGR of 26%

and 19% over 2011 to 2014E respectively.

Price to Book Value of the stock is expected to be at 1.54 x and 1.28 x

respectively for FY13E and FY14E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.1172.00 for Medium to Long term investment.

Industry Overview

With India experiencing a cycle of growth, the Rs 64 trillion (US$ 1.25 trillion)-Indian

Banking industry is poised to grow exponentially as the sector reflects the health of an

economy. Indian banks have proved their mettle time and again as their regulations

align with international standards, while they remain conventional in their approach.

The Reserve Bank of India (RBI), the regulator, continuously monitors the

macroeconomic environment to formulate its policies and directions.

According to the world's largest rating agency, Standard & Poor (S&P)'s Ratings

Services, India's banking system has a high level of stable, core customer deposits

supported by the system's good franchise, extensive branch networks, and large, yet

growing, domestic savings.

In fact, the next three decades are highly crucial and opportunity-oriented for the

Indian banking industry, which is primarily driven by demographics and reforms, said

Mr M V Nair, Former CMD, Union Bank.

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Key Statistics

According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled

Commercial Banks', September 2011, Nationalised Banks, as a group, accounted for

52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its

associates accounted for 21.8 per cent. The share of New private sector banks, Old

private sector banks, Foreign banks and Regional Rural banks in aggregate deposits

was 13.7 per cent, 4.8 per cent, 4.6 per cent and 2.9 per cent, respectively.

With respect to gross bank credit also, nationalised banks hold the highest share of

51.6 per cent in the total bank credit, with SBI and its associates at 22.1 per cent and

New Private sector banks at 13.8 per cent. Foreign banks, Old private sector banks

and Regional Rural banks held a share of 5.2 per cent, 4.8 per cent and 2.5 per cent,

respectively.

• Another statement released by the RBI stated that bank deposits grew 13.4 per

cent to Rs 60.72 trillion (US$ 1.19 trillion) in the fiscal 2011-12 (the year to

March 23, 2011), while loans and advances grew 17.08 per cent to Rs 47.54

trillion (US$ 930 billion).

• The RBI data reveals that India Inc raised US$ 2.7 billion through external

commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs)

in January 2012.

• Owing to a rise in core foreign currency assets (FCAs), India's foreign exchange

reserves increased by US$ 862 million to US$ 294.82 billion for the week ended

March 16, 2012.

Indian Banking Sector: Recent Developments the Indian banking sector has come a

long way from serving through traditional approach to the online genre. According to a

survey by online survey company Ipsos, 57 per cent of Indians prefer to use the

Internet for banking and other financial holdings rather than shopping online. Things

have been made much easier by eliminating hefty paper processes and introducing

customer-friendly online banking facility with robust security features. Such changes

have not only facilitated access to several banking products, but have also improved

customer loyalty and money transfer mechanism.

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Transactions in mobile banking are also on an upsurge as more than 2,800,000

transactions (worth about Rs 196.12 crore [US$ 38.37 million]) were conducted during

February 2012. The figure indicated a 300 per cent increase in terms of volume and

over 200 per cent increase in terms of value.

At present, the RBI has allowed 65 banks to conduct mobile banking out of which 47

banks have commenced offering these services.

National Australia Bank has recently opened its branch in Mumbai, India. The bank

would not only support existing institutional corporate and business banking

customers operating or trading with India but would also act as a mediator for Indian

clients who want to expand or invest in Australia or New Zealand.

Meanwhile, Development Bank of Singapore has expressed its keenness to operate as

a wholly-owned subsidiary (WoS) in India, while it infused Rs 500 crore (US$ 97.82

million) into its local branch operations. The entity is committed to establish a

universal banking franchise in India and looking forward to become a WoS to achieve

the same.

HDFC Bank is planning to set up kiosks that would allow employees to apply for loans

without stepping out of their offices. Initially the kiosks would be set up in offices of

the companies that already have a banking relationship with HDFC. The bank would

set up 1,500 priority desks across 500 companies in nine cities by August 2012.

Launch of RuPay

India has launched the country's first domestic payment card network, RuPay, to

compete with multinational Visa Inc. and Mastercard Inc. The new development will

not only help banks reduce cost of issuing a debit card but will also lead to expansion

of payment network in rural areas. National Payments Corp of India Ltd (NPCI), jointly

owned by banks, is the nodal agency to manage and promote RuPay.

NPCI has stated that 200,000 RuPay cards have already been issued and the target is

to have 10 million debit cards under the brand by March 2013. The system is expected

to be used for credit cards by March 2015 and all public sector banks are expected to

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join the system by the end of 2012. RuPay based debit cards can be used by the

consumers on the Internet from September 2012.

Currently, India has around 260 million debit cards in use.

Government Initiatives

In its Budget for 2012-13, the Government has earmarked a capital of Rs 15,888 crore

(US$ 3.11 billion) to be infused in public sector banks, regional rural banks and other

financial institutions, including Nabard (National Bank for Agriculture and Rural

Development). Apart from this, the Government is also planning to set up a financial

holding company that will raise funds for public sector banks.

Taking a step closer towards mobile banking, the RBI has allowed banks to facilitate

cross-border remittance between bank accounts through mobiles, subject to clearance

from the local regulator. Banks will stand responsible for ensuring quality of funds,

adherence to know-your-customer (KYC) and other standards during the process.

Furthermore, the RBI has liberalised regulations pertaining to FCAs to provide

operational flexibility to Indian entities making overseas direct investments. After

satisfying stipulated requirements and conditions, Indian entities can open, hold and

maintain FCAs abroad that would simplify the process of making overseas direct

investments.

Road Ahead

According to a report by the Boston Consulting Group (BCG) India, prepared in

association with a leading industry organisation and Indian Banks Associations (IBA),

Indian banking industry would be the world's third largest in asset size by 2025 and

mobile banking would become the second largest banking mode after ATMs.

Furthermore, owing to the positive eco-system of the industry and regulatory and

Government initiatives, mobile banking is anticipated to enhance from 0.1 per cent of

transactions in a 45 per cent financial inclusion base in 2010 to 34 per cent of the

transactions with 80 per cent rural inclusion base by 2020, as per the report.

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______________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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Firstcall India Equity Research: Email – [email protected]

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