Indian Banks

Private sector lender Axis Bank today said it is in talks with Max New York Life to acquire up to five per cent stake in the latter.

“We are in talks with Max New York Life to pick up a less than five per cent stake. We are working on the valuation and the result of the talks will be known soon,” Axis Bank Executive Director and CFO S Sengupta said here.

The bank has tied up with Max New York Life to distribute the latter’s life insurance products beginning April 1 after ending its relationship with MetLife.

“Our distribution tie-up will be on, irrespective of whether we acquire a stake in Max New York Life or not,” Sengupta said. Max New York Life is a joint venture between the US-based New York Life and Analjit Singh’s Max India.

A stake, even a small one, will indicate a strong relationship between Axis Bank and Max New York Life, besides creating value for the bank, Sengupta said.

(BS)

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Axis Bank, the country’s third largest private sector lender, is in talks to buy a five per cent stake in Max New York Life Insurance for around Rs 200 crore.

This would value Max New York Life at close to Rs 4,000 crore. It is getting into a bancassurance arrangement with Axis, through which the company’s insurance policies would be sold through the bank’s branches from May.

When asked, a spokesperson for Axis said, “We do not have any comments to offer on the specifics of our strategic business initiatives.” Max’s spokesperson refused to comment.

Max was among the first players to enter the life insurance arena when the sector was opened in 2000 and was ranked eighth in terms of total premium income in the period between April 2009 and February 2010. It had a market share of 1.9 per cent.

The transaction comes within months of Hemendra Kothari, the former chairman of DSP Merrill Lynch, acquiring Ambuja Cements’ 11.5 per cent stake in ING Vysya Life Insurance for Rs 190 crore. The deal had valued the company at Rs1,650 crore.

The Anil Dhirubhai Ambani Group is looking to shed stake through a mix of private placement and public offer in its life insurance venture, Reliance Life, to step up the growth of the business.

Sources said Axis zeroed in on a stake in Max New York Life after looking around for other opportunities. The deal had been in the works for a while but both the bank as well as the insurer denied the development when Business Standard sought comments earlier.

In October last year, Axis’ Managing Director and CEO Shikha Sharma had told Business Standard the bank was not keen on manufacturing insurance products. She was the MD & CEO of the country’s largest private sector life insurer, ICICI Prudential Life Insurance Company, before she joined Axis last July.

Sharma, however, appeared keener on foraying into health insurance, which she had said was a “more open area”. Max India-promoted health insurance company Max Bupa is set to formally launch operations next month.

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Axis Asset Management Co, backed by India’s third-largest non-state bank, plans to triple its assets over the next year as it aims to become one of the nation’s top 10 money managers.

Funds under management may rise more than threefold to Rs 10,000 crore ($2.2 billion) by March 31, 2011, Chief Executive Officer Rajiv Anand said in an interview in Mumbai on Monday. Anand, who targets making Axis one of the top 10 equity asset managers in the nation over the next few years, said he’ll consider acquiring rivals. Axis posted the biggest increase in assets under management last month among Indian money managers, according to data compiled by Bloomberg, with funds climbing 42 per cent to Rs 3,750 crore in February.

“We are in market share grab mode,” Anand, 44, said. “We expect our growth to be quite steep over the next couple of years.” India’s mutual funds industry has gained fivefold in size in as many years, with assets under management swelling to Rs 7.8 lakh crore in February, according to data compiled by Bloomberg. India’s 1.1 billion people, almost half of whom are under 25 years old, are spending more on electronics, clothes and cars as incomes grow in the world’s second-fastest growing major economy.

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Private sector Axis Bank had initiated talks with investors to spin off its private equity (PE) business as a separate entity, the lender said on Monday. The move was part of the lender’s restructuring plan, said a senior official of the bank. The lender’s PE venture, Axis Private Equity, has a fund size of $150 million.

Shikha Sharma, managing director and chief executive officer of Axis Bank, on the sidelines of the MMA Women Managers’ Convention 2010 held at Chennai on Monday, said, “We have initiated a dialogue with our investors and the process would take a few weeks and this would be part of our restructuring plan.”

She refused to give a time frame for the plan. “We will first get investors’ approval and then decide,” she said.

According to industry experts, the move will help the PE arm to gain investor’s confidence, who prefer independent entities instead of banks or corporate-sponsored funds.

Axis PE’s dominant investment theme is infrastructure enabling/ services companies and the parent has 40 per cent of commitments in the same space, according to market sources.

The PE arm so far has invested Rs 60 crore in Hyderabad-based Vishwa Infrastructures and Services, Rs 126 crore in Delhi-based railway line manufacturer Harish Chandra India, Rs 75 crore in Neesa Leisure, Rs 67 crore Corrtech International and Rs 54 crore in Shalivahana Green Energy.

Commenting on the bank’s plan to set up a subsidiary in the UK, Sharma said the bank had got permission from RBI and was awaiting one from the Ministry of External Affairs, she added.

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The increase in the cash reserve ratio (CRR) has started taking a toll on interest rates, with Axis Bank withdrawing its teaser home loan scheme two months before schedule.

India’s third-largest private bank had launched a fixed-cum-floating rate home loan scheme on January 6. It offers 8.25 per cent interest rate for the first two years. Thereafter, the loan is priced 3.5 per cent and 3 per cent less than the mortgage reference rate for loans up to and above Rs 30 lakh, respectively.

A senior bank executive said given the emerging interest rate environment, the bank did not want to offer a fixed rate for two years. However, the 8 per cent fixed rate will continue for the first year.

The product was taken off the company’s website today. The sudden withdrawal surprised many. A direct selling agent who has submitted applications under the scheme said, “With Axis Bank suddenly withdrawing its teaser rate scheme, I am approaching other banks.”

Axis was one of the last banks to offer such a scheme. Last year, a number of banks, led by the country’s largest, State Bank of India, launched these products.

A senior SBI executive said while cost pressures were emerging, the bank would fulfill its commitment and continue to the offer the product till the end of March.

Sanctions under Housing Development Finance Corporation’s teaser rate scheme close on February 13. Disbursements, however, will continue till March 31. One of the advantages of Axis Bank’s product was that there was no prepayment penalty. “After two years, if the bank’s rates go up sharply, customers can shift to other banks without any penalty,” said an industry source.

Other banks charge around 2 per cent of the outstanding amount as pre-payment penalty. The Reserve Bank of India’s (RBI’s) move to raise the CRR by 75 basis points is expected to suck out around Rs 36,000 crore from the system. This, along with advance tax outflows in mid-March, is expected to reduce liquidity. As a result, banks are expected to review teaser loan schemes in March.

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The country’s third-largest private sector lender, Axis Bank, plans to ramp up its fledgling wealth management and private banking businesses and nearly triple the number of relationship managers over the next 12 months.

A late entrant into the high net worth individual space, the lender started its private bank around six months ago. “We want to be a serious contender in private banking, which is going to have the highest compounded annual growth rate over the next few years,” said Sonu Bhasin, president, Retail Financial Services, Axis Bank.

The lender has 15 relationship managers for private banking and 70 for wealth management, which is aimed at customers with a net worth of at least $100,000 (about Rs 46 lakh).

By March 2011, Axis Bank plans to have at least 35 relationship managers for private banking and 70 for wealth management.

“Since relationship managers for private banks are a rare commodity, we are also looking to tap people from within the bank,” said Bhasin.

The bank is being advised by Geneva-based Banquee Privée Edmond De Rothschild Europe (BPERE) on its private banking initiative.

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Axis Bank, the country’s third-largest lender, is set to have its own headquarters (HQ) soon. The bank is close to finalising a deal with the Wadias to move its headquarters from the leased premises at Maker Towers in Cuffe Parade to the sprawling Bombay Dyeing mill complex at Parel in central Mumbai.

While the deal size could not be ascertained, sources said the cost could be over Rs 500 crore. HDFC Realty is said to be advising the bank on the transaction.

When contacted, a bank executive confirmed that the deal had been nearly finalised. The going rate in the area was around Rs 13,000 per square feet, property consultants said.

Axis Bank has been on the lookout for acquiring a corporate headquarters for the last few years. However, the bank’s board had earlier turned down a proposal, citing high real estate cost. The proposal was revived after Shikha Sharma took charge last year.

Axis Bank is the latest in a series of financial sector companies to move out of the south Mumbai business district. A few months ago, JPMorgan shifted its India headquarters to Kalina, which is next to the Bandra-Kurla Complex (BKC). Swiss banking major UBS, too, has moved to BKC, which houses the headquarters of ICICI Bank, Citi, Bank of Baroda, Bank of India, Dena Bank and UTI, among others.

HDFC Bank, IndusInd Bank and Aditya Birla Financial Services would be Axis Bank’s neighbours, while private equity player KKR is also expected to move into the nearby Peninsula Complex.

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Axis Bank today announced the appointment of Adarsh Kishore as non-executive chairman. Kishore, who just returned to India after completing his term as executive director at the International Monetary Fund, replaces PJ Nayak, who was chairman and chief executive till July. In addition, former LIC chairman S B Mathur has been appointed an additional independent director.

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