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B U S I N E S S I N D I A u November 18, 2007 Cover Feature

Straight shots
With an international
foray in place, new
joint ventures and a
brand new image, Axis
Bank is raring to go

T
he number 13 favours Pan-
gal Jayendra Nayak well. For
one, Nayak, chairman and
managing director, Axis
Bank, sits in the 13th floor
office of the Cuffe Parade building.
Two, his team of 13 released quarterly
numbers in Singapore last fortnight;
results they knew would beat industry
expectations. And three, Axis has
been titled as a best bank in its 13th
year of existence. This number, for
him, has been lucky thrice.
Nayak has not much to say about
odd numbers; but calls the award a
beginning of sorts. His core team – as
they sit at a large roundtable –
applauds on such news. Axis has tradi-
tionally been a media-shy entity,
till it recently changed name from
UTI Bank. Until then, in the line of
hierarchy, ‘quote just the chairman’
was the only quote you’d get. And
Nayak is considered to be the quietest
of them all.
“They have done much in little
time, without being in the news.
That’s a commendable achievement,”
says Janmejaya Sinha, senior partner
and managing director, Boston Con-
sulting Group. “It’s a well-deserved
award. This is the bank we all look up
to. It is our benchmark,” says Nasser
Munjee, chairman, DCB. “Axis’ recent
growth is nothing less than impres-
sive,” says S.P. Talwar, the former
deputy governor of the Reserve Bank
of India.
Nayak says it’s been a long jour-
ney getting here, and the numbers
show. If you take just the last quarter

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B U S I N E S S I N D I A u November 18, 2007 Cover Feature

PHOTOS: PALASHRANJAN BHAUMICK

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B U S I N E S S I N D I A u November 18, 2007 Cover Feature

advances are up at Rs36,876 crore.


And amid all this, retail assets
have now grown to Rs8,927 crore.
Axis has traditionally been a corpo-
rate bank, but the focus is now on
retail. “We’d like to have a balance
between corporate and retail in
future,” says Nayak.
It is on the back of these numbers
that Nayak can take it a bit easy. A
PhD in economics from Cambridge
University, he lets his desk be covered
with books, files, papers and more. If
that were not enough, you’ll find a lot
more set in neat rows on a longer table
behind him.
He’s been a teacher in the past but,
in the early 1990s, he joined the
Department of Economic Affairs as
joint secretary. By the mid 1990s, he
had shifted to the Unit Trust of India,
as executive trustee. And when it was
time for UTI Bank’s earlier chairman
Supriya Gupta to retire, Nayak was
found to be the right man, at the right
place, at the right time, to take charge.
This was in 2000.
Nayak had with him a bureau-
crat’s background, and Axis has tradi-
tionally been a pseudo-government
entity. It’s the first private sector bank
with government ownership, pro-
moted by the trio of Unit Trust of
India, Life Insurance Corporation of
India, and General Insurance Corpo-
ration. Till last year, there were noises
that LIC had plans to buy UTI’s resid-
Nayak (sitting) with executive directors (from left) Agrawal, Kumar and Ramani ual stake in the bank.
Instead, a finance ministry direc-
figures, Axis’ Casa (current account- business, demand deposits are up 46 tive stalled the move and LIC recently
savings account) ratio has risen per cent to Rs23,430 crore and brought its stake in Axis down to 10
against the industry trend. Axis
Bank’s net profit growth was driven
Rs crore
by high net interest income and fee 200000 5000 2500
income growth. The core income TURNOVER NET INTEREST INCOME PAT
stream (net interest income and fees)
now constitutes 93 per cent of the 4000 2000
150000
operating revenue for the bank.
The bank also managed to improve 3000 1500
its Casa on the back of nearly half its 100000
growth on the savings and current
2000 1000
accounts. This, in turn, brought down
its cost of funds. “In a quarter when
50000
most banks were expected to see an 1000 500
increase in their cost of funds, Axis
has managed to bring it down,” says
0 0 0
Punit Srivastava, analyst (banking
2005 06 07 08 09 2010 2005 06 07 08 09 2010 2005 06 07 08 09 2010
and finance), Enam Research.
If you look at its interest-based 2008-2010 figures are estimates. Source: Macqarie Research

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B U S I N E S S I N D I A u November 18, 2007 Cover Feature

Baby boomers “We felt that there were a lot of synergies between retail
banking and the AMC. We could also offer distribution. We have

If the average age at Axis Bank is 29, the age at its subsidiary Axis
Sales is much lower. Formed as a wholly-owned subsidiary in
December 2005, its objective was to market financial products,
built a full-fledged commercial bank. There was nothing much in
terms of newer products and services which could be offered,”
says P.J. Nayak, chairman and CEO.
minimise costs and operational risk. It started business with Axis Private Equity has set up a $500 million offshore infra-
marketing Axis’ credit cards and retail loan products. structure fund, with a $50-million seed investment. “Axis Bank
Last year, it also marketed Axis’ POS machines, as well as has a key advantage in this area – asset origination,” says
motor vehicle loans. Today, Axis Sales has 39 branch offices all Seshadri Sen, an analyst at Macquarie Research. “Its loan portfo-
over the country, and another 25 are on their way. While it made lio among mid-corporates gives it a strong base of customer rela-
a loss of Rs3 lakh last year due to higher operational cost, its tionships, to use to originate asset opportunities for the
employee headcount has shot up to 6,500 people, up from infrastructure fund.”
3,500 last year. Soon, another company will be formed as a wholly-owned
Axis Private Equity, the bank’s second subsidiary, was until subsidiary of the bank, to undertake trustee services. Axis already
recently called UBL Asset Management Company. Its name was does this business from the bank. “We have a large trustee busi-
changed because the new name reflects the business it is ness, but we now thought that for governance sake it would be
engaged in better. better that it now be kept at an arm’s length,” says Nayak. u

The agricultural banking team

company Website, the this year.


tally of visitors has soared “The loss of UTI as a brand name
from 15,000 to 300,000; could have been detrimental. Instead,
and new accounts are up 6 it has worked to Axis’ advantage,”
per cent,” says Hemant says Sumant Sinha, CEO, Aditya Birla
Kaul, the company’s Retail. “This is a bank that has fought
senior vice-president well against adversity,” says Madhu
Corporate banking at the fore (retail banking). Kela, head (equity investments),
The name change was Reliance Capital. “It has a focussed
per cent. Now, UTI is drawing up plans necessitated when a contract with UTI management team and a reputation
to set up a special purpose vehicle and Mutual Fund, which owns the brand in the market for being professional.”
publicly auction its shareholding. name, was nearing the end of its term. Amidst all this, international
This clears all doubt that Axis will The name Axis was a matter of much expansion has turned out to be the
remain in the private sector. debate, because of its Second World key to Axis’ growth strategy. The idea
“The name UTI carried a public sec- War connotations. Even the Jews, is to build a strong initial presence
tor perspective, a new Axis gives it a including community leaders as far around Asia. Thus, branches have
private entity image,” says Siddharth away as Germany, were consulted come up at the Dubai International
Kar, business head from the Ogilvy before the final decision was taken Financial Centre, Singapore, Hong
family, who spearheaded the recent and Nayak made a formal announce- Kong and a representative office in
advertising campaign. “On the new ment in the company’s annual report Shanghai.

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B U S I N E S S I N D I A u November 18, 2007 Cover Feature

5 YEAR CAGR
DEPOSITS SAVING DEPOSITS CURRENT ACCOUNT NET INTEREST INCOME

Axis Bank 69.15%


IDBI Bank 66.55%
ICICI Bank 63.12% ICICI Bank 62.09%
Axis Bank 57.91%
ICICI Bank 50.85% Axis Bank 51.17%
ICICI Bank 48.35%
HDFC Bank 45.95% HDFC Bank 42.59%
Axis Bank 36.76% HDFC Bank 36.24%

HDFC Bank 31.07%


OBC 21.87% OBC 22.48%
Oriental Bank Punjab National BANK 19.16%
of Commerce 17.57% State Bank of India 18.02% Punjab National BANK 19.49%
Union Bank of India 15.86%

Plans are to upgrade the Shanghai fees,” says a Macquarie Research had initially just one branch – in
office to a branch by next year, which report. Ahmedabad. It accepted corporate
will require an investment of $20 mil- deposits and managed to make a
lion. The Singapore branch, set up 18 Getting there profit of Rs3 crore in its first year of
months ago, has been bringing in Indeed, the journey has been a long operation. “But, we were like the
much business; it already has a bal- one, with uneasy beginnings. Set up Children of Solomon, still learning to
ance sheet of over $1 billion. with a capital of Rs150 crore, UTI Bank swim,” says M. M. Agarwal, executive
The international strat- director (corporate bank-
egy, says Nayak, is linked ing). In year two, it booked
to four lines of business: losses of Rs10 crore, fol-
• credit and trade lowing an MS Shoes scan-
finance facilities to dal. “Woolworth of
Indian companies and Calcutta had gone
their trading partners; down under and
•raising finance over- Indo Rama was in
seas for Indian compa- bad shape. Equity
nies and their offshore was going bad.”
subsidiaries; Axis’ focus was
• risk management of initially skewed
their overseas assets towards the east of
and liabilities; and India, because its
• financial advisory ser- previous chairman
vices and wealth man- Supriya Gupta had
agement for overseas hailed from that city.
Indians. This fourth line “Today, we have
of business will happen tremendous brand
through Axis’ tie up equity in Kolkata,”
with Rothschild Europe. says Kaul, VP, retail
International assets, banking. But one thing
in fact, are expected to followed another.
rise to 20 per cent of the Gupta’s health took a
balance sheet in three- beating when he had a
four years from less than bypass surgery. A credit
3 per cent now. “As the squeeze saw interest rates
breadth of products go up, causing non-per-
increases, the bank should forming asset levels to
be able to charge its exist- touch 12 per cent. It was only in the
ing clients a wider range of Kaul (seated) with the marketing team late 1990s that an upside took place,

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B U S I N E S S I N D I A u November 18, 2007 Cover Feature

when the bank’s focus on sectors like “Finacle’s success today is based capital adequacy ratio (CAR) is at
infrastructure and power started to on the success of its product on an all-time high. “The bank
pay off. “These were sectors we had our systems,” says V.K. will not need to ‘look over
identified – much before all other Ramani, executive director its shoulder’, and this con-
players in the market did. On the back (technology and business fidence will drive it to be
of this, in 1998, we had an initial pub- processes). one of the fastest-grow-
lic offering at Rs21 per share, at Rs11 Yet, if you have to pin- ing banks among the
premium,” says R. Asok Kumar, exec- point the one area where large-cap players.
utive director (corporate strategy). much of Axis’ growth has The comfortable
The first few projects included come from (and will con- capital position
being debt provider and advisor for tinue to do so in future should also enable
the Delhi-Gurgaon Expressway and too), it will be the non- the bank to enter
the Baspa Power Project. Today, there interest income side. Axis’ new businesses,”
are several of them in the wings: the levels of non-interest says the Macquarie
Mumbai International Airport, JN income have been signifi- report.
Port’s expansion of the third and cantly lower than those of Secondly, Nayak
fourth container terminals, the Ban- many of its peers, and a can now focus on
galore Metro Rail Corporation, and consistent criticism from expansion. He has
the controversial Sethu Samudram some investors is that the seen Axis grow organi-
Project, to name a few. bank’s RoAs have been sub- cally, and says it’s his
“Much of this has happened dur- par and that it has been a preferred option for
ing Nayak’s term,” says Agrawal, who ‘destroyer’ of capital. growth. “This model has
has been with the company since its Axis Bank is today a strong worked for us,” he says.
inception. In the year 2000, when player in debt syndication. Its The numbers, even ana-
Nayak took over, among the first comfortable capital adequacy lysts will tell you, are
things he put in place was a focus on allows it to look for aggres- impressive. Profit after
technology. The entire bank func- sive opportunities in this tax for 2006-07 touched
tioned on a distributed database, and business, which requires Rs659 crore, up 35
each branch worked on separate soft- significant upfront invest- per cent from the previous
ware program. “We integrated all this ment. “This represents a further year. This number has grown more
to build a strong MIS system. In upside to Axis Bank’s fee than 30 per cent in a record 30 of
fact, when Infosys was to launch income ratio – albeit over the the past 32 quarters. Axis’
Finacle, its core banking solu- longer term, as these busi- net interest income also was
tion, its first customer was Axis. nesses take some time to up 45 per cent to Rs1,567
build up,” says Mac- crore. While the number of
quarie’s Seshadri. It is branches has increased to
these improving fees 561, its ATMs have
that could pull the crossed 2,300 in
bank out of a number. That
low RoA rut; Now, as apart, Axis has
the bank goes 56,000 POS
about improving its (point of sale)
fee income streams, machines too
its RoA too will – the third-
trend up signifi- largest such
cantly. network in the
In August this country.
year, Axis completed If you look at
raising a capital of $1 its interest-
billion, a GDR (global based business,
depository receipt) demand dep-
offering that was sig- osits are up
nificantly larger than 46 per cent to
its previous ones. Rs23,430 crore,
There were key ben- advances are up
efits that came at Rs36,876
from this. For one, crore. Amid

The technology team

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B U S I N E S S I N D I A u November 18, 2007 Cover Feature

6,473 are already the third-largest seller in


the country,” says Kaul.
The focus on retail is much stronger
o the liabilities side, yet new ground is
NO. OF ATMS 2007 being broken. At all priority branches,
the bank has set up business centres –
5,000 to 17,000 sq ft in size, meant for
3,271 high net worth customers. These are
facilities with conference rooms,
concierge services and a children’s play
2,341 area too.
1,605 This leaves one last issue. When
879 the board last met, Nayak was given
SBI
an extension of two years at the bank
ICICI as chairman and managing director.
Axis Earlier, there was a move to split the
HDFC PNB two roles, which was unacceptable to
Naik. Analysts say the extension can
all this, retail assets have grown to a its joint ventures. Its wealth manage- be credited to Nayak’s good track-
size of Rs8,927 crore. Axis has tradi- ment services business, for instance. record, but there does exist a succes-
tionally been a corporate bank, which In a joint venture with Rothschild of sion issue within the bank. “There is a
is a blessing in the days of the sub- the UK, Axis now offers private bank- new set of people at the middle man-
prime crisis. But retail is too large an ing services too. While Axis will agement level that can be groomed
area to be avoided, and is being given a recruit and train people, the product for the role,” says an analyst at JP Mor-
renewed focus. “We’d like to have a will be from Rothschild. In another gan. As for Nayak, he says he still has
balance between corporate and retail joint venture with Metlife in insur- two years to go. And these two, he
in future,” says Nayak. ance, the bank distributes its insur- expects, will be more eventful than
With the recent fund-raising, ance products in the country. “We the one that past by.
Axis will use a part in strengthening launched in December 2006, and we u RYAN RODRIGUES

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