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CMP 567.85
Target Price 630.00
ISIN: INE238A01034
MAY 4th
, 2015
AXIS BANK LTD
Result Update (PARENT BASIS): Q4 FY15
BUYBUYBUYBUY
Index Details
Stock Data
Sector Banking
BSE Code 532215
Face Value 2.00
52wk. High / Low (Rs.) 655.35/300.12
Volume (2wk. Avg.) 1069000
Market Cap (Rs. in mn.) 1346088.43
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
T. Interest 354786.00 395231.60 436493.78
G.I. Income 225891.80 251860.14 278155.20
Net Profit 73578.20 82081.11 90262.68
EPS 31.04 34.63 38.08
P/E 18.29 16.40 14.91
Shareholding Pattern (%)
1 Year Comparative Graph
AXIS BANK LTD. BSE SENSEX
Highlights
Third largest private sector bank, Axis Bank reported
Net Profit of Rs. 21805.90 mn rising by 18.36% YOY in
4th quarter of FY15 compared to Rs. 18423.20 mn in
the corresponding quarter of the previous year.
Net Interest Income for quarter ended 31st March
2015 rose by 20.01% YOY to Rs. 37992.40 mn from Rs.
31657.50 mn for March quarter, 2014.
Gross NPAs and Net NPAs stood at 1.34% and 0.44%
respectively in Q4 FY15. The Bank held provision
coverage of 78% as on 31st March 2015.
Savings Bank Deposits recorded a healthy growth of
14% YOY to reach Rs. 882920.00 mn as on 31st March
2015.
The Bank’s Advances grew 22.17% YOY to Rs.
2810830.30 mn as on 31st Mar, 2015.
The book value of the Bank’s investments portfolio as
on 31st March 2015, was Rs. 1323430.00 mn.
The Bank’s Balance Sheet grew 21% YOY and stood at
Rs. 4619320.00 mn as on 31st March 2015.
The Capital Adequacy Ratio (CAR) as on 31st March
2015 under Basel III was 15.09% and Tier-I CAR was
12.07%.
The network of Axis Bank comprises of 2589 domestic
branches (including extension counters) and 12355
ATMs situated in 1714 centres across the country as
on 31st March 2015.
The bank has recommended the payment of dividend @
230% of Rs. 4.60 per share on face value of Rs. 2.00/- each
for the financial year ended 2015.
Net Income and Net Profit of the company is expected
to grow at a CAGR of 13% & 13% over 2014 to 2017E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
AXIS BANK LTD. 567.85 1346088.43 31.04 18.29 3.01 230.00
ICICI BANK LTD. 331.25 1921219.80 19.27 17.19 2.62 250.00
HDFC BANK LTD. 989.20 2480761.50 40.76 24.27 5.70 400.00
YES BANK LTD. 839.80 351033.40 48.17 17.43 3.82 90.00
Profile of the Bank
Axis Bank, third largest private sector bank in India offers an entire spectrum of financial services to customer
segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses. The network of Axis
Bank comprises of 2589 domestic branches (including extension counters) and 12355 ATMs situated in 1714
centres across the country as on 31st March 2015. Axis Bank Ltd. has been promoted by the largest Financial
Institutions of the country, UTI, LIC, GIC and its subsidiaries. The Bank was jointly promoted by Specified
Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India), Life Insurance Corporation of
India (LIC), General Insurance Corporation of India (GIC), National Insurance Company Ltd., The New India
Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The
shareholding of Unit Trust of India was subsequently transferred to SUUTI, an entity established in 2003. The
Bank was set up in 1993 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. Axis Bank started its operations in 1994 and has
its registered office in Ahmedabad. The Bank’s shares are listed on the National Stock Exchange and the Bombay
Stock Exchange. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE).
Axis Bank, India’s third largest private bank, has been featured in Forbes Asia's FAB 50 list of 2014. This is the
fourth time Axis Bank has been featured and is amongst the only two banks in this renowned list. In January
this year, Axis Bank became India’s first private sector bank to open a branch in China.
International Business
The Bank has eight international offices with branches at Singapore, Hong Kong, Dubai (at the DIFC), Colombo
and Shanghai; representative offices at Dubai and Abu Dhabi and an overseas subsidiary at London, UK. The
international offices focus on corporate lending, trade finance, syndication, and investment banking and
liability businesses. The total assets under overseas branches were USD 7.86 billion as on 31st March 2015.
QUARTERLY HIGHLIGHTS (PARENT BASIS)
Q4 FY15
(In Rs. Million) MAR-15 MAR-14 % Change
Total Interest Earned 96970.80 79652.30 21.74
Interest on advances 70246.5 58097.8 20.91
Income on investments 25301.80 20749.10 21.94
Other Income 26873.10 22134.00 21.41
Provisions & contingencies -7098.20 -5052.30 40.49
NII 37992.40 31657.50 20.01
Net Profit 21805.90 18423.20 18.36
Advances 2810830.3 2300667.6 22.17
Deposits 3224419.4 2809445.6 14.77
Total interest earned rose by 14.13% and stands at Rs. 88897.40 mn in the Dec quarter of FY15. Total interest
comprises mainly of interest on advances and income on investments. Interest on advances rose by 17% from Rs.
55572.50 mn to Rs. 65019.20 mn in Q3 FY15. Income on investments rose by 8.03% and stands at Rs. 22797.90
mn against Rs. 21104.10 mn in the corresponding quarter of the previous year. Provisions and contingencies
increased by 150.46% at Rs. 5071.50 mn. Net Interest Income (NII), the difference between interest earned and
expended is up by 20.29% and stands at Rs. 35895.60 mn against Rs. 29840.10 mn in the corresponding quarter
of the previous year. In Q3 FY15, Net profit also followed rising by 18.43% to Rs. 18997.60 mn from Rs. 16041.10
mn in Q3 FY14. The Bank has fixed July 30, 2014 as the Record Date for the purpose of ascertaining the eligible
shareholders who would be entitled to receive 5 (Five) equity shares of nominal value of Rs. 2/- each.
Asset Quality
Gross NPAs and Net NPAs stood at 1.34% and 0.44% respectively in Q4 FY15. The Bank held provision coverage
of 78% as on 31st March 2015, as a proportion of Gross NPAs, including prudential write-offs. The provision
coverage before accumulated write-offs was 87%. As on 31st March 2015, the Bank’s Gross NPA was Rs.
41101.90 mn as against Rs. 31464.10 mn as on 31st March 2014. During the quarter, the Bank added Rs. 6100.00
mn to Gross NPAs. Recoveries and upgrades were Rs. 1880.00 mn and write-offs were Rs. 2140.00 mn. The
cumulative value of net restructured advances as on 31st March 2015 stood at Rs. 81660.00 mn, constituting
2.71% of net customer assets.
Segment Revenue
Rs .In Mn Q4 FY15 Q4 FY14 CHNG %
Treasury 144065.00 119042.3 21%
Wholesale 59092.50 51083.7 16%
Retail 75072.50 62537.1 20%
Other business 3355.20 2512.8 34%
Asset Quality Q4 FY15 Q4 FY14 Chng%
Gross NPAs 41101.90 31464.10 30.63
Net NPAs 13167.10 10246.20 28.51
Gross NPA % 1.34 1.22 12 BP
Net NPAs % 0.44 0.40 4 BP
Latest Updates
• The Bank’s Balance Sheet grew 21% YOY and stood at Rs. 4619320.00 mn as on 31st March 2015. The Bank’s
Advances grew 22% YOY to Rs. 2810830.00 mn as on 31st March 2015.
• The book value of the Bank’s investments portfolio as on 31st March 2015, was Rs. 1323430.00 mn of which
Rs. 812460.00 mn were government securities, while Rs. 250680.00 mn were invested in corporate bonds
and Rs. 260290.00 mn in other securities such as equities, preference shares, mutual funds etc.
• Savings Bank Deposits recorded a healthy growth of 14% YOY to reach Rs. 882920.00 mn as on 31st March
2015, while Current Account deposits grew 15% YOY and stood at Rs. 561080.00 mn.
• The shareholders’ funds of the Bank grew 17% YOY and stood at Rs. 446770.00 mn as on 31st March 2015.
• The Bank is well capitalised and the Capital Adequacy Ratio (CAR) as on 31st March 2015 under Basel III was
15.09% and Tier-I CAR was 12.07%.
• Other income (comprising fee, trading profit and miscellaneous income) for Q4 FY15 grew 21% YOY and
stood at Rs. 26870.00 mn as against Rs. 22130.00 mn during the same period last year.
• During FY15, the Bank added 187 branches to its network across the country and at the end of 31st March
2015, it had a network of 2,589 domestic branches and extension counters and 12355 ATMs situated in 1714
centres.
• Total Income has increased from Rs. 101786.30 million for the quarter ended March 31, 2014 to Rs.
123843.90 million for the quarter ended March 31, 2015.
• During Q4 FY15, Net interest margin was at 3.81%.
FINANCIAL STATEMENTS & ESTIMATIONS (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as on 31st March, 2014 -2017E
Axis Bank Ltd FY14A FY15A FY16E FY17E
CAPITAL AND LIABILITIES
Capital 4698.45 4741.00 4741.00 4741.00
Reserves and Surplus 377506.42 442024.10 510095.81 581509.22
Deposits 2809445.65 3224419.40 3611349.73 3972484.70
Borrowings 502909.42 797582.70 1156494.92 1445618.64
Other Liabilities and Provisions 137888.94 150556.70 162601.24 178861.38
Total Liabilities 3832448.88 4619323.90 5445282.70 6183214.94
ASSETS
Cash and Balances with Reserve Bank of India 170413.20 198188.40 225934.78 253046.95
Balances with Banks and Money at Call and Short notice 111973.75 162801.90 208386.43 254231.45
Investments 1135484.34 1323428.30 1508708.26 1704840.34
Advances 2300667.58 2810830.30 3369509.39 3827972.28
Fixed Assets 24102.11 25143.10 25897.39 27088.67
Other Assets 89807.90 98931.90 106846.45 116035.25
Total Assets 3832448.88 4619323.90 5445282.70 6183214.94
Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY 17E
Description 12m 12m 12m 12m
Net Income 306411.60 354786.00 395231.60 436493.78
Other Income 74052.20 83650.40 93688.45 103994.18
Total income 380463.80 438436.40 488920.05 540487.96
Interest Expended -186895.20 -212544.60 -237059.92 -262332.76
Gross Interest Income 193568.60 225891.80 251860.14 278155.20
Operating Expenses -79007.70 -92037.40 -102961.79 -114361.37
Operating Profit 114560.90 133854.40 148898.35 163793.83
Provisions and Contingencies -21074.60 -23286.10 -26206.11 -29073.40
Profit Before Tax 93486.30 110568.30 122692.24 134720.42
Tax -31309.60 -36990.10 -40611.13 -44457.74
Profit After Tax 62176.70 73578.20 82081.11 90262.68
Equity Capital 4698.40 4741.00 4741.00 4741.00
Reserves 377506.50 442024.10 510095.81 581509.22
Face Value (Rs.) 10.00 2.00 2.00 2.00
EPS 132.34 31.04 34.63 38.08
Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th June, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net Income 86023.60 88897.40 96970.80 99879.92
Other Income 19476.10 20390.70 26873.10 21498.48
Total income 105499.70 109288.10 123843.90 121378.40
Interest Expended -50775.10 -53001.80 -58978.40 -59927.95
Gross Interest Income 54724.60 56286.30 64865.50 61450.45
Operating Expenses -23101.60 -23140.30 -24736.70 -25769.02
Operating Profit 31623.00 33146.00 40128.80 35681.43
Provisions and Contingencies -7250.40 -5071.50 -7098.20 -6101.52
Profit Before Tax 24372.60 28074.50 33030.60 29579.90
Tax -8265.50 -9076.90 -11224.70 -9879.69
Profit After Tax 16107.10 18997.60 21805.90 19700.22
Equity Capital 4719.30 4726.50 4741.00 4741.00
Face Value (Rs.) 2.00 2.00 2.00 2.00
EPS 6.83 8.04 9.20 8.31
Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 132.34 31.04 34.63 38.08
Operating Profit Margin (%) 37.39% 37.73% 37.67% 37.52%
PAT Margin (%) 20.29% 20.74% 20.77% 20.68%
P/E Ratio (x) 4.29 18.29 16.40 14.91
ROE (%) 16.27% 16.47% 15.94% 15.40%
ROCE (%) 3.10% 3.00% 2.82% 2.73%
Debt-Equity Ratio 8.67 9.00 9.26 9.24
Book Value (Rs.) 813.48 188.47 217.18 247.31
P/BV (x) 0.70 3.01 2.61 2.30
Charts
INDUSTRY OVERVIEW
The banking sector in India is sound, adequately capitalised and well-regulated. Indian financial and economic
conditions are much better than in many other countries of the world. Credit, market and liquidity risk studies
show that Indian banks are generally resilient and have withstood the global downturn well.
With a sense of optimism slowly creeping in, the banking industry expects that 2015 will bring better growth
prospects. This optimism stems from factors such as the Government working hard to revitalise the industrial
growth in the country and the RBI initiating a number of measures that would go a long way in helping the banks
to restructure. The recent announcements of RBI, it is felt, are a clear pointer to the future of the restructured
domestic banking industry.
Market Size
The Indian banking sector is fragmented, with 46 commercial banks jostling for business with dozens of foreign
banks as well as rural and co-operative lenders. State banks control 80 percent of the market, leaving relatively
small shares for private rivals.
At the end of February, 13.7 crore accounts had been opened under Pradhanmantri Jan Dhan Yojna (PMJDY) and
12.2 crore RuPay debit cards were issued. These new accounts have mobilised deposits of Rs 126940.00 mn (US$
2.01 billion).
Standard & Poor’s estimates that credit growth in India’s banking sector would improve to 12-13 per cent in
FY16 from less than 10% in the second half of CY14.
Investments/developments
There have been many investments and developments in the Indian banking sector in the past few months.
• The United Economic Forum (UEF), an organisation that works to improve socio-economic status of the
minority community in India has signed a memorandum of understanding (MoU) with Indian Overseas Bank
(IOB) for financing entrepreneurs from backward communities to set up businesses in Tamil Nadu
• The RBI has allowed third-party white label automated teller machines (ATM) to accept international cards,
including international prepaid cards, and said white label ATMs can now tie up with any commercial bank
for cash supply.
• With the objective of increasing investment opportunities for Indian alternative investment funds (AIFs), the
RBI has allowed these funds to invest overseas.
• In a major boost for the infrastructure sector, as well as for banks financing long gestation projects, the RBI
has extended its flexible refinancing and repayment option for long-term infrastructure projects to existing
ones where the total exposure of lenders is more than Rs 5000.00 mn (US$ 78.98 million).
• Syndicate Bank is planning to open 300-500 branches in the next financial year.
• RBI governor and European Central Bank President has reported that a MoU on cooperation in central
banking. “The memorandum of understanding provides a framework for regular exchange of information,
policy dialogue and technical cooperation between the two institutions. Technical cooperation may take the
form of joint seminars and workshops in areas of mutual interest in the field of central banking,” RBI said on
its website.
• RBL Bank has announced that it would be the anchor investor in Trifecta Capital’s Venture Debt Fund, the
first alternative investment fund (AIF) of its kind in India with a commitment of Rs 500.00 mn (US$ 7.89
million). This move provides RBL Bank the opportunity to support the emerging venture debt market in
India.
• The RBI has allowed banks to become insurance brokers, permitting them to sell policies of different
insurance firms subject to certain conditions.
• Bandhan Financial Services Pvt. Ltd has raised Rs 16000.00 mn (US$ 252.69 million) from two international
institutional investors to help convert its microfinance business into a full service bank. Bandhan was one of
the two entities to get a banking licence in April 2014 along with infrastructure finance company IDFC Ltd.
• Yes Bank Ltd has signed an MoU with the US government’s development finance institution Overseas Private
Investment Corp (OPIC) to explore US$ 220 million of financing to lend to micro, small and medium
enterprises (MSMEs) in India.
• Reliance Industries Limited (RIL) has said that it has applied for a Payments Bank licence, where the
company will be the promoter and State Bank of India will be its joint venture partner with an equity
investment of up to 30 per cent.
• The RBI has allowed bonds issued by multilateral financial institutions like World Bank Group, the Asian
Development Bank and the African Development Bank in India as eligible securities for interbank borrowing.
The move will further develop the corporate bonds market, RBI said in a notification.
• The Competition Commission of India (CCI) has cleared the merger of ING Vysya Bank with Kotak Mahindra
Bank, which would create the country's fourth largest private sector lender. The proposed Rs 15,000 crore
(US$ 2.36 billion) deal is not likely to have any appreciable adverse effect on competition in India, as per the
competition "The share of both entities in various relevant markets is insignificant," the CCI said.
• Tata Consultancy Services Ltd (TCS), India’s largest software services exporter, has announced that it has
expanded its presence in Singapore with the opening of a new 1,000-seat TCS Singapore banking and
financial services (BFS) centre. The new centre replaces a 500-seat centre opened in 2011 and will offer a
broader range of services to global banks in the Asia-Pacific region, with a major focus on digital offerings.
Government Initiatives
There have been a lot of developments in the Indian banking sector.
� The Government has announced a capital infusion of Rs 69900.00 mn (US$ 1.1 billion) in nine state run
banks, including State Bank of India (SBI) and Punjab National Bank (PNB), but based on new efficiency
parameters such as return on assets and return on equity. In a statement, the finance ministry reported, “This
year, the Government of India has adopted new criteria in which the banks which are more efficient would
only be rewarded with extra capital for their equity so that they can further strengthen their position."
� The Union cabinet has approved the establishment of the US$ 100 billion New Development Bank (NDB)
envisaged by the five-member BRICS group as well as the BRICS “contingent reserve arrangement” (CRA).
� The RBI has decided to allow nominated banks to import gold, including coins, on a consignment basis,
extending its clarification issued in November 2014, which had eased certain categories of gold imports.
� To help Micro Small and Medium Enterprises (MSME), RBI has permitted setting up of an exchange-based
trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers,
including government departments and PSUs.
Road Ahead
The Indian economy is now on the threshold of a major transformation, with expectations of policy initiatives
being implemented. Positive business sentiments, improved consumer confidence and more controlled inflation
should help boost the economic growth. Higher spending on infrastructure, speedy implementation of projects
and continuation of reforms will provide further impetus to growth. All this translates into a strong growth for
the banking sector too, as rapidly growing business turn to banks for their credit needs, thus helping them grow.
Also, with the advancements in technology, mobile and internet banking services have come to the fore. Banks in
India are focusing more and more to provide better services to their clients and have also started upgrading their
technology infrastructure, which can help improve customer experience as well as give banks a competitive edge.
Many banks, including HDFC, ICICI and AXIS are exploring the option to launch contact-less credit and debit
cards in the market soon. The cards, which use near field communication (NFC) mechanism, will allow customers
to transact without having to insert or swipe.
OUTLOOK AND CONCLUSION
� At the current market price of Rs. 567.85, the stock P/E ratio is at 16.40 x FY16E and 14.91 x FY17E
respectively.
� Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.34.63 and
Rs.38.08 respectively.
� Net Income and Net Profit of the company is expected to grow at a CAGR of 13% & 13% over 2014 to 2017E
respectively.
� Price to Book Value of the stock is expected to be at 2.61 x and 2.30 x respectively for FY16E and FY17E.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs.630.00 for Medium to Long term
investment.
Disclaimer:
This document is prepared by our research analysts and it 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 we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its 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. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.
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