Axis Bank Ltd: Buy

CMP: Rs.515

Edelweiss maintains a buy rating on Axis Bank Ltd with a 12-month target price of Rs.585. 

The brokerage house says, even in a tough scenario, the bank will deliver a return on equity of 16-17%. The strong operating metrics and strengthened liability franchise also lend comfort.

Meanwhile, Axis Bank has sought approval of shareholders to raise Rs.35,000 crore through multiple instruments including green bonds and from overseas markets. The approval would be sought at Axis Bank’s 22nd Annual General Meeting of shareholders on 22 July. The funds, which would be within the overall borrowing limits of the bank, will be raised in one or more tranches on a private placement basis. 

The Reserve Bank of India (RBI) on 31 May 2016, notified that Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs) can now invest up to 62% of the paid-up capital of Axis Bank, from existing 49% under the Portfolio Investment Scheme (PIS). 

The central bank further notified that the total foreign investment from all sources i.e. Foreign Institutional Investors (FII)/Registered Foreign Portfolios Investors (RFPIs)/Foreign Direct Investment (FDI)/Non-Resident Indians (NRI)/ Persons of Indian Origin (PIO)/American Depository Receipts (ADR)/Global Depository Receipts (GDR) in the bank shall not exceed 62% of paid-up capital. The central bank has stated that Axis Bank has passed resolutions at its board of directors' level and a special resolution by the shareholders, agreeing for enhancing the limit for the purchase of its equity shares and convertible debentures by FIIs/RFPIs. The purchases could be made through primary market and stock exchanges, RBI said. 

Axis Bank is a high beta stock (1.16) and is trading well above its 50-day, 100-day and 200-day moving average of Rs.500.17, Rs.456.33 and Rs.460.02, respectively, as per data collated by ETMarkets.com. The stock is trading with a P/E of 14.89 and P/B of 2.29.