Axis Bank’s share price slipped as much as 3.3% in Friday’s morning session as India’s government sold a 55.6 billion rupee ($912 million) stake in the bank to the market in India’s largest block deal this year.
The government, which is the largest shareholder in the bank through a trust called the Specified Undertaking of the Unit Trust of India (SUUTI), has disposed of 42.26 million shares – or 9% of Axis Bank’s share capital – at 1,315.14 rupees each.
Bookrunners sold the shares at an average price of 1313.25 rupees to investors during smaller block trades in the secondary market on Friday.
The price is slightly lower than the middle point of the price guidance of 1,290 rupees to 1,357.35 rupees, representing a discount of 3.2% to Thursday’s closing. After their initial fall, Axis Bank's shares bounced back on Friday afternoon, closing up 2.3%.
Books were well covered with participation from 89 investors. 40% of the shares went to foreign investors from the US, Europe and Asia. The foreign investment tranche was multiple times covered.
The block, launched on Thursday, represented almost half of SUUTI’s current ownership of 20.72% in the bank. However, SUUTI will remain the largest shareholder with a 11.72% stake, 1.08% more than the second largest owner Life Insurance Corp of India, which is also under the state control.
India’s government needs to narrow the country’s fiscal deficit by selling stakes in state-controlled and other companies.
The government is trying to keep its fiscal deficit at less than 4.6% of gross domestic product for the financial year ending March, and wants to bring it down to 4.1% by end-March 2015. The figure for 2012-2013 was 4.9%, according to India’s Ministry of Finance.
To achieve that, the government aims to raise 190 billion rupees - sharply down from last February target of 540 billion rupees - by selling stakes by the end of March, the finance minister said in February.
On Friday, India also raised $513 million from a new exchange-traded fund that will invest in state-controlled companies’ stocks for retail investors, said the source.
Last December, the government trimmed a 4% stake in Power Grid, raising about $260 million. It in that month it also sold 21 billion rupees of shares back to National Hydroelectric Power Corp.
Bankers said more should come shortly. The government is looking to divest a 5% stake in Coal India, which could net the government more than $1.4 billion based on the current market price. The government currently owns 90% in the coal producer.
The government is also aiming to sell a 10% stake in Indian Oil Corporation to raise about $600 million to $700 million.
Shares of Axis Bank have surged 73.4% since last September, when they were as low as 783 rupees; they have risen 4.5% this year, outperforming the 2.7% increase in the country’s S&P BSE Sensex Index.
The shares were marketed at a price range of 1,290 rupees to 1,357.35 rupees, representing a discount of zero to 5% to Thursday’s closing. There will be a lock-up period of six months on the vendor.
Citi, JM Financial and JP Morgan were joint bookrunners on the block deal.
