Axis Bank buying CreditAccess Grameen will be a 'win-win', CLSA says

Brokerage firm CLSA, which has an 'Outperform' rating on Axis Bank with a target price of ₹1,500, has floated a scenario asking what if Axis Bank were to acquire CreditAccess Grameen.

The foreign brokerage believes such a deal would be a win-win for both parties.

CLSA says Axis would likely make an open offer and acquire the entire entity. At current market prices, the total consideration is estimated at around $2.3 billion, which it believes is manageable for a bank of Axis Bank's size.

According to CLSA, the acquisition would give Axis Bank access to a high-margin business with strong return on assets that is largely priority sector lending compliant.

It added that asset quality stress in the microfinance space is largely behind, with the sector now in recovery mode, making the timing of such a transaction favourable.

Over the longer term, Axis Bank could also benefit from funding synergies, the brokerage added.

Nearly four years after acquiring Citibank's India retail business, Axis Bank is reportedly preparing for another major acquisition.

Reports suggest the lender is evaluating the purchase of the promoter stake in microfinance lender CreditAccess Grameen and may place a bid.

Sources had earlier told CNBC-TV18 that the promoters of CreditAccess Grameen have initiated a process to sell their entire stake. The promoter entity, CreditAccess India BV, currently holds a 66.28% stake in the company.

Sources further indicate that CreditAccess Grameen has likely appointed bankers to manage the stake sale process, with one foreign investment bank and one Indian investment bank mandated for the transaction.

The value of the promoter stake is estimated at around ₹14,000 crore, while the company's market capitalisation stands at approximately ₹22,000 crore.

CreditAccess Grameen is among the leading microfinance institutions in the country, with a strong presence in rural and semi-urban markets.

It operates a network of 2,222 branches and serves around 44 lakh borrowers. Its assets under management are estimated at about ₹26,000 crore.

Shares of Axis Bank Ltd. ended Monday's session marginally lower by 0.045% at ₹1,341. The stock has gained 5% over the past one month.