Quantum Securities AXIS Bank Ltd Event Update Nov 18, 2010

Market Performer
Financial Highlights
Y/E March
31 st (Rs Operating NIM Growth P/ABV
mn) Income (%) PA T (%) ABV (Rs) (x) P/E (x)

2008 43808.4 3.5 10710.3 62.5 238.2 6.0 47.7

Industry Private Bank
Close Price (Rs) 1427 2009 65830.9 3.3 18153.6 69.5 275.4 5.2 28.2

FY12E Target Price (Rs) 1537 2010 89502.8 3.8 25146.3 38.5 385.7 3.7 23.0
52 Week H/L (Rs) 1608/889 2011E 114081.9 3.6 31618.2 25.7 440.6 3.2 18.5
Volumes (BSE+NSE)* 1317687
2012E 141982.4 3.6 39973.0 26 .4 512.3 2.8 14.6
Shares O/S (mn) 408.8
Market Cap (Rs mn) 583375.5
Free Float (%) 58.9 Axis Bank has decided to merge the broking, investment banking
Bloomberg UTIB IN (IB) and financial product distribution business of Enam Securities
Reuters AXBK.BO Pvt. Ltd with its 100% subsidiary Axis Securities & Sales Ltd. At the
*Three month avg same time Axis Bank will be demerging its debt syndication and
corporate finance business into this 100% subsidiary.

In this non cash deal the above mentioned businesses of Enam

Share Holding Pattern*
Securities have been valued at Rs 20.67bn and post the transaction
Particulars No. of %
Shares Holding the promoters of Enam will hold 3.37% stake in Axis Bank. The
(mn) share swap is 5.7 shares of Axis Bank for every 1 share held by
Promoters 153.3 41.1 Enam promoters. Post this transaction, Vallabh Bhansali key
MF / UTI 16.4 4.4 promoter of Enam will be inducted as a board member of Axis Bank.
FI / Banks 6.2 1.7 Another promoter Manish Chokhani will be the MD & CEO of Axis
FII 152.2 40.8 Securities and Sales Ltd and Jagdish Master will be joining the board
Public and others 80.7 12.0 of the same company.
Total 408.8 100.0
*As on September 30, 2010 The Bank and Enam have signed a non-compete agreement for 5
years which excludes the AMC, portfolio management and insurance
distribution business of Enam. Axis Bank also has got a right to use
the Enam brand for 2 yrs, for which it will be paying royalty to
Enam.

This deal is subject to regulatory approvals from RBI, SEBI, stock

exchanges, high courts of Gujarat and Maharashtra and shareholders
and creditors of respective companies.

Impact on Axis Bank

Axis Bank is expected to issue 13.8mn shares to Enam
promoters and so there will be 3.4% equity dilution. However
over the long term, we expect this acquisition to be EPS
accretive for the bank, as it intends to combine the
investment banking and equities franchise of Enam Securities
with its debt syndication and commercial banking franchise.
Axis will derive benefit from Enams retail franchise,
relationships and expertise in IB and institutional broking
Date: November 18, 2010 business and from around 400 employees including the top
Analyst: Rati Pandit management of Enam who are moving to Axis Bank.
Tel: 91-22-66321300
The bank will be able to increase its fee income by selling
rati@qsmail.com
equity products to its corporate and retail clients.

Disclaimer: this document is based on information obtained from sources believed to be reliable. We do not make any representation or warranty as to its
accuracy, completeness or correctness. Opinions & theories expressed are based on present circumstances & judgment and are subject to change without
notice. Quantum Securities Pvt. ltd. accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further
communication given in relation to this document. Quantum Securities Pvt. ltd. and its associates, directors, and/or employees may have positions in, and may
effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these
companies. If annualized returns are greater than 20% over 12 to 18 months1then the stock is rated as BUY, between a range of 15-20% is rated as Out-
performer. If annualized returns are lower than -20% over 12 to 18 months then the stock is rated as SELL, between a range of -15% to -20% is rated as
Under-performer. +/ (-) 15% range moves with the market momentum and is rated Market-performer. However, within this zone we may choose to give a Out-
Quantum Securities

Axis bank will have an edge over its peers ICICI Bank and
HDFC Bank in the equity issuance business, as Enam
currently occupies No.3 position and has 8.9% market
share in the equity issuance business.
The Bank has valued Enams broking and IB business at
19.7x its FY11E EPS. As against this its peers Edelweiss
Capital, Indiabulls Financial Services, Motilal Oswal and
India Infoline are trading at 16. 6x, 10.8x, 15.1x and 15.6x
their FY11E consensus earnings. At the first sight where this
deal appears expensive, in the medium to long term Axis
bank will be able to benefit from Enams lucrative broking
and IB business.

Broking Peer Comparision

CMP
(Rs.) EPS P/E (x)
Company 18-
Name Nov-10 FY10 FY11E FY12E FY10 FY11E FY12E
Enam Broking
/ IB Valuation *1,499.7 **46.7 ***76.2 - 32.1 19.7 -
Edelweiss
Capital 59.5 4.6 3.6 4.1 13.0 16.6 14.4
Indiabulls
Financal 202.9 8.5 18.8 24.8 23.8 10.8 8.2
Motilal Oswal 176.9 3.0 11.7 14.2 59.7 15.1 12.4
India Infoline 115.8 5.3 7.4 9.0 21.7 15.6 12.8
Source: QS Research, Bloomberg

*Valuation of Enam Securities broking and IB business has been Rs 20.67bn. Same
has been divided by 13.8mn shares expected to be issued by Axis Bank.
**PBT of Enam Securities Pvt. Ltd was Rs 920mn. Out of that 30% tax has been
deducted to arrive at Rs 644mn estimated PAT for FY10. Post that we divide the
PAT by 13.8mn shares to arrive at FY10E EPS.
***Enam had a PBT of Rs 770mn from April 1, 1010 to Oct 20, 1010. So for full
year after considering buoyant market conditions in H2FY11 we estimate Enams
broking and IB business profit of Rs 1500 mn on a conservative basis. Post that we
deduct 30% tax and estimate a PAT of Rs 980 mn for FY11E and divide it by
13.8mn shares.

Valuations
At a CMP of Rs 1427, Axis Bank is trading at 14.6x its FY12E EPS
of Rs 97.8 and 2.8x its FY12E ABV of Rs 512.3. We maintain a
Market Performer rating on the bank with FY12E target price of
Rs 1537.

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Income Statement
Y/E Mar (Rs mn) FY08 FY09 FY10 FY11E FY12E
Total Income 88008.0 137323.6 155838.0 202903.8 263522.6
Interest Earned 70053.2 108354.9 116380.2 153227.6 201691.3
Interest Expended 44199.6 71492.7 66335.3 88821.9 121540.1
Net Interest Income 25853.5 36862.1 50045.0 64405.7 80151.1
Other Income 17954.9 28968.8 39457.8 49676.3 61831.3
Total Operating Income 43808.4 65830.9 89502.8 114081.9 141982.4
Operating Expenses 21549.3 28582.1 37097.2 48322.3 60355.2
Operating Profit 22259.2 37248.8 52405.6 65759.6 81627.3
Provisions and Contingencies 5796.4 9396.8 13891.9 17116.1 20599.8
Profit Before Tax 16462.8 27852.0 38513.7 48643.4 61027.5
Tax 5752.5 9698.4 13367.3 17025.2 21054.5
PAT 10710.3 18153.6 25146.3 31618.2 39973.0

Balance Sheet
Y/E Mar (Rs mn) FY08 FY09 FY10 FY11E FY12E
Net Worth 87706.9 102148.0 160446.2 184899.7 215273.1
Deposits 876262.2 1173741.1 1413002.2 1781370.6 2237718.8
Borrowings 56240.4 155198.7 171695.5 231701.0 316800.0
Other Liabilities & Provisions 75569.0 46132.7 61334.6 74457.2 97522.0
Total Liabilities 1095778.5 1477220.5 1806478.5 2272428.5 2867313.9
Cash with RBI 73056.6 94192.1 94738.8 120242.5 162234.6
Balance with Banks 51985.8 55976.9 57325.6 90803.3 145923.9
Investments 337051.0 463303.5 559748.2 693185.3 844373.2
Advances 596611.4 815567.7 1043431.2 1309368.0 1647090.4
Fixed Assets 9228.5 10728.9 12224.2 14326.4 16204.6
Other Assets 27845.1 37451.5 39010.6 44503.0 51487.2
Total Assets 1095778.5 1477220.5 1806478.5 2272428.5 2867313.9

Yields, Margins, Spreads

Y/E Mar (%) FY08 FY09 FY10 FY11E FY12E
Yield on Advances 9.8 10.6 8.6 9.0 9.4
Cost of Deposits 5.1 6.1 4.4 4.9 5.4
Spread 4.7 4.5 4.2 4.1 4.0
Yield on Investments 6.9 7.6 6.7 7.1 7.5
Cost of Funds 6.0 6.5 5.2 4.8 5.1
Net Interest Margin 3.5 3.3 3.8 3.6 3.6

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Performance Ratios
Y/E Mar (%) FY08 FY09 FY10 FY11E FY12E
CASA Ratio 45.7 43.1 46.7 45.1 44.1
Cost to Income Ratio 49.2 43.4 41.4 42.4 42.5
NIM 3.5 3.3 3.8 3.6 3.6
RoA 1.2 1.4 1.7 1.6 1.6
RoE 16.1 19.1 19.9 18.3 20.0
Credit/Deposit Ratio 68.1 69.5 73.8 73.5 73.6
Deposit Growth 49.1 33.9 20.4 26.1 25.6
Advances Growth 61.8 36.7 27.9 25.5 25.8
Provisions to Avg Assets 0.6 0.7 0.8 0.8 0.8
Capital Adequacy Ratio 14.0 13.7 15.8 13.8 12.2

Valuation Ratios
Y/E Mar FY08 FY09 FY10 FY11E FY12E
EPS (Rs.) 29.9 50.6 62.1 77.3 97.8
Adj. Book Value (Rs.) 238.2 275.4 385.7 440.6 512.3
P/E (x) 47.7 28.2 23.0 18.5 14.6
P/ABV (x) 6.0 5.2 3.7 3.2 2.8

Disclaimer: this document is based on information obtained from sources believed to be reliable. We do not make any representation or warranty as to its
accuracy, completeness or correctness. Opinions & theories expressed are based on present circumstances & judgment and are subject to change without
notice. Quantum Securities Pvt. ltd. accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further
communication given in relation to this document. Quantum Securities Pvt. ltd. and its associates, directors, and/or employees may have positions in, and may
effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these
companies. If annualized returns are greater than 20% over 12 to 18 months then the stock is rated as BUY, between a range of 15-20% is rated as Out-
performer. If annualized returns are lower than -20% over 12 to 18 months then the stock is rated as SELL, between a range of -15% to -20% is rated as
Under-performer. +/ (-) 15% range moves with the market momentum and is rated Market-performer. However, within this zone we may choose to give a Out-
performer, Under-Performer or Market performer. 4