Thursday, November 18, 2010

Axis buys Enam Sec in Rs. 2,067-cr deal

Axis Bank, India's fourth-largest bank in terms of market capitalisation, has announced a Rs2,067 crore all-stock deal to take over the investment banking and equity businesses of Enam Securities. The deal comprises investment banking unit, corporate advisory services and equity distribution arm of Enam Securities. Asset management company and insurance broking arm are not part of the deal.


According to media reports, Enam's net income for April-October 2010 stands at approximately Rs180 crore and a PBT of Rs77 crore. Annualizing these figures and assuming a tax rate of 30%, the deal values Enam at approximately 22x its FY11 annualized earning per share (EPS) which is at a premium to other broking firms and is reflective of the market leadership position of Enam. (Edelweiss trades at approximately 13.7x its annualized FY11 earnings and India Infoline at approximately 16.8x its annualized FY11 EPS).


  • The deal will lead to an equity dilution of around 3.5% for Axis bank, and based on Enam’s annualised YTD FY11 financials would lead to an earning per share (EPS) dilution of around 0.5%, hence making it largely EPS neutral.
  • The acquisition of Enam's investment banking and broking businesses is another step by Axis Bank in the direction towards building a full service financial conglomerate.

As the deal is largely EPS neutral for Axis Bank, we maintain our ‘Hold’ recommendation and price target of Rs1,680 on the stock. The deal is sentimentally positive for stocks of brokerage firms such as Edelweiss Securities, India Infoline etc.

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