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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING

AXIS BANK LTD

Stock Coverage

www.hemsecurities.com

Date 01st Mar 2019

BSE Code 532215

NSE Code AXIS BANK

Market Cap (Rs Cr) 180765.50

52 week High/Low 734.35/477.50

Industry Bank-Private

Face Value Rs 2/Share

Shares O/S (In No) 257.10 Cr

EPS * 3.82

Book Value* 259.43

P/B 2.71

*Note: On TTM basis

Shareholding Pattern as on Dec’ 2018

Research Analyst : Astha Jain

Axis Bank is India’s third largest private sector bank, offering a wide

spectrum of financial products and services to customer segments

spanning retail, Small and Medium Enterprises (SMEs) and corporate

businesses. As on 31st December 2018, the Bank had a network of 3,964

domestic branches and extension counters situated in 2,321 centres

compared to 3,589 domestic branches and extension counters situated in

2,082 centres last year. As on 31st December 2018, the Bank had 12,705

ATMs and 3,548 cash recyclers spread across the country.. It also has 11

overseas offices with branches in Singapore, Hong Kong, Dubai (at the

DIFC), Shanghai and Colombo; an offshore banking unit at International

Financial Service Centre (IFSC), Gujarat International Finance Tec-City

(GIFT City), Gandhinagar; representative offices in Dubai, Abu Dhabi,

Sharjah and Dhaka; and an overseas subsidiary in London, UK.

Robust Financial Performance: During Q3FY19 bank has witnessed

whopping jump of more than 130 % in its bottomline at Rs 1680.85 Cr on

YoY basis. The Bank’s operating Profit for the same quarter grew 43% YOY

to Rs 5,525 crore. The Bank’s Net Interest Income (NII) grew 18% YOY to

Rs 5,604 crores during Q3FY19. Net interest margin for Q3FY19 stood at

3.47%, Gross slippages in the quarter were Rs 3,746 crores, or 0.70% of

Gross Customer Assets, compared to Rs 4,428 crores in Q3FY18. Net

Slippages in the quarter were Rs 2,124 crores, or 0.40% of Gross customer

assets. Net Slippages in Retail are down 18% from Q3 FY18.

Strong ROE guidance with focus on three vectors: Bank has guided to

deliver 18% ROE on a sustainable basis by focusing on three vectors

Growth, Profitability and Sustainability. On growth vector . bank’s focus

over the next 3 years would be to improve deposit growth materially to

fund its strong loan growth aspirations, establish leadership in payments

and digital capabilities, and to materially scale up its subsidiaries. On

profitability vector, bank intend to make all significant portfolio mix

choices based on an assessment of Risk Adjusted Return on Capital, or

RAROC. Bank also intend to focus on improving its cost efficiency &

reducing the credit costs sustainably below its long-term averages. On

Sustainability vector, bank is strengthening its technology, analytics,

operations or process; & investing in its risk management architecture.

Valuation

The bank is currently trading at 2.71x of TTM book value of Rs 259.43. On the back of strong growth strategy with robust financial performance in Q3FY19 , bank has guided for healthy ROE going forward .All these infuse optimism in bright future prospects of bank. Hence , we recommend “Buy” on the stock with price target of Rs 830 (appreciation of almost 18%) for long term investment.

For Private Circulation Only HEM RESEARCH

BUY CMP 703.10 TARGET 830 LONG TERM INVESTMENT

Promoter24%

FII47%

Others29%

AXIS BANK LTD



Bank’s Subsidiaries

Axis Finance: One of the fastest growing NBFCs with product offerings like structured financibg,

special situations funding etc.

Axis Mutual Fund: Among the fastest growing AMC since launch in ’09 & has more than 3.6 mn

client folios. It has market share of 3.46 % as at end of Dec’18.

Axis Direct : It is among the fastest growing equity broker in India & is among top 3 brokers in India

with cumulative client base of 2.02 mn.

Axis Capital: It is leading player in investment banking & ranked no 1 ECM banker executed equity

deals worth over Rs 1000 bn in last 5years.

Freecharge: It is being positioned by the Bank as an engine that generates a large base of new to

bank customers that are young and digitally native.

A Treds : Axis Bank is one of the three entities allowed by RBI to set up the Trade Receivables Discounting System (TReDS), an electronic platform for facilitating cash flows for MSMEs TReDS is an electronic platform that connects MSME sellers with buyers and financiers Bank’s digital invoice discounting platform ‘Invoicemart’ continues to be India’s leading TReDS platform with market share of nearly 40%. There are 18Financiers on-boarded on the platform.

For Private Circulation Only HEM RESEARCH

\

North23%

East19%West

20%

South24%

Central14%

Branch Distribution Area Wise

North23%

East19%

West20%

South24%

Central14%

Branch Distribution Region Wise

Metro29%

Urban23%

Semi-Urban31%

Rural17%

Branch Distribution Area Wise

9381

100 104114

76

100

85

0

20

40

60

80

100

120

Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19

New Branches Opened

AXIS BANK LTD



Strong loan growth The Bank’s strong deposit growth has enabled healthy loan growth. Domestic loan growth for the Q3FY19 stood at 18% on YOY basis. The international loan book de-grew by 19%.Retail continued to be the key growth driver – growing at 20% YOY, with continued diversification in portfolio mix towards products offering higher risk adjusted returns. SME lending grew by 13% YOY. Term loans and working capital loans grew by 6% and 16% YOY, respectively. Share of working capital to overall SME loan book currently stands at 79%. The focus of bank remains on building a highly rated, profitable SME book. Presently, 86% of non NPA outstanding exposure is to clients rated SME3 or better. In the Corporate Bank, domestic loan growth stood at 13%, and the international book de-grew 23% YOY. Within the Corporate book, bank’s mix has been shifting steadily towards better rated clients,

For Private Circulation only HEM RESEARCH

54884

58742 56983

60262

6223827%

19% 19%

14%

13%

0%

5%

10%

15%

20%

25%

30%

50000

52000

54000

56000

58000

60000

62000

64000

SME LOAN

SME Loan (In Cr) YOY Growth

15% 15%

8% 9% 13%

3%4%

2%

-23%

-23%-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19

Trend in domestic & overseas corporate loan

growth (YoY)

Domestic Advances

Overseas Advance

0

20

40

60

80

100

Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Mar'18 Dec'18

2738 40 41 45 47 49

1515 15 13 13 13 13

5746 45 46 42 40 38

Loan Book % wise Segment Contribution Along with Total Loan Book Size

in Cr

Retail SME Corporate

196966 230067 281083 338774 373069 439650 475104

AXIS BANK LTD



Improving Asset quality

During Q3FY19 ,slippages continue to remain at moderate levels. Gross slippages in the quarter were Rs 3,746 crores, or 0.70% of Gross Customer Assets, compared to Rs 4,428 crores in Q3FY18 and Rs 2,777 crores in Q2FY19. Slippages from the corporate segment were Rs 1,887 crores. Corporate Slippages came predominantly from bank’s previously disclosed stress book. Of all corporate slippages in the quarter, 98% came from the BB & Below pool. Net Slippages in the quarter were Rs 2,124 crores, or 0.40% of Gross customer assets. Of this, Rs 1,394 crores came from Corporate, Rs 237 crores from SME and Rs 493 crores from Retail and Agri segments. Net Slippages in Retail are down 18% from Q3 FY18. In the Agri business, net slippages are down 30% compared to Q3 FY18. The Bank has received an indicative list from RBI relating to asset quality divergence for the fiscal year ending 31st March 2018. The Bank has been asked to classify 2 accounts as NPA. These accounts had a total outstanding amount of Rs 225 crores which constitutes less than 0.7% of last year’s slippages of the Bank. Both of these accounts have already been downgraded by the Bank in Q1 FY19. In addition, the Bank has been asked to make additional provisions of Rs 99.7 crores on 2 accounts already NPA as of March 2018. This provision has been incorporated in Q3 financials. NPA ratios for the Bank improved sequentially, with GNPA and Net NPA reducing by 21 bps and 18 bps respectively. Bank ended the quarter with a GNPA ratio of 5.75% and Net NPA ratio of 2.36%. From Q2 to Q3, there is a net reduction of 14% in the standard BB & Below book. Bank’s BB & Below book now stands at Rs 7,645 crores, or 1.4% of gross customer assets, down from 7.3% at peak.

1.061.22 1.34

1.67

5.04

6.77 6.525.96 5.75

0.32 0.4 0.440.7

2.11

3.43.09

2.54 2.36

0

2

4

6

8

Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Mar'18 June'18 Sept'18 Dec'18

GNPA & NNPA Ratio

GNPA% NNPA%

60%64% 65% 65%

60%66% 65% 69%

73%75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Sept'16 Dec'16 Mar'17 June'17 Sept'17 Dec'17 Mar'18 June'18 Sept'18 Dec'18

Provision Coverage Ratio





AXIS BANK LTD

Consolidated P&L A/c

Rs Cr

Particulars FY16 FY17 FY18 FY19E FY20E

Total Income 51364.23 57596.70 58476.67 68642.42 79255.44

Growth % 12.13 1.53 17.38 15.46

Total Exp 34955.60 39514.98 42392.05 49125.45 56654.83

Pre Prov Profit 16408.63 18081.72 16084.62 19516.97 22600.61

Growth % -- 10.20 (11.04) 21.34 15.80

Provisions 3718.71 12127.91 15518.73 12414.98 8690.49

PBT 12689.92 5953.81 565.89 7101.99 13910.12

Exceptional 0.00 0.00 0.00 0.00 0.00

PBT After Excep 12689.92 5953.81 565.89 7101.99 13910.12

Tax 4332.33 1986.7 101.86 2130.60 4173.04

PAT 8357.59 3967.11 464.03 4971.39 9737.08

Minority Interest & Share Of Associate

(7.92) (14.00) (8.21) (8.21) (8.21)

Adjusted PAT 8349.67 3953.11 455.82 4963.18 9728.87

Growth % --- (52.66) (88.47) 988.85 96.02

Ratios


NIM% 3.37 3.12 2.89 3.18 3.36

GNPA % 1.76 5.58 7.61 6.00 5.00

NNPA% 0.74 2.33 3.83 2.76 2.21

ROA % 1.65 0.68 0.07 0.65 1.09

ROE % 16.95 7.18 .76 7.43 13.13

Credit Deposit Ratio %

96.19 91.85 98.72 98.72 98.72

Prov Cover Ratio %

55.74 57.35 50.68 55.51 56.99

CASA Ratio % 47.25 51.22 53.48 55.77 58.16

Cost To Inc Ratio 39.27 41.30 47.90 47.11 47.13

EPS 32.48 15.38 1.77 19.31 37.84

Book Value 208.48 219.54 250.02 269.32 307.16



AXIS BANK LTD

Consolidated Balance Sheet

Rs Cr


Capital & Liabilities

Capital 476.57 479.01 513.31 513.31 513.31

Reserves & Surplus

53082.19 55901.34 63694.10 68657.28 78386.16

Minority Interest 39.05 61.31 69.51 69.51 69.51

Deposits 358302.19 414982.68 455657.76 533119.58 623749.91

Borrowings 113847.73 112454.76 155767.09 182247.49 213229.56

Other Liabilities & Provisions

20638.88 27582.92 28001.59 32761.86 38331.38

Total 546386.60 611462.00 703703.00 817369.03 954279.83

Assets

Cash & Balances with RBI

22361.16 30857.95 35481.06 41512.84 48570.02

Bal With Bank & money at Call & Short Notice

11341.65 20108.17 8429.75 9862.81 11539.48

Investments 131398.64 129018.35 153036.71 179052.95 209491.95

Advances 344663.00 381164.67 449843.65 526317.07 615790.97

Fixed Assets 3573.76 3810.24 4048.82 4737.12 5542.43

Other Assets 33048.08 46502.64 52863.38 55886.24 63344.97

Total 546386.30 611462.00 703703.00 817369.03 954279.82




AXIS BANK LTD

Standalone Quarterly Financial Highlights

Rs Cr Rs. Crore

Particulars Q3FY19 Q3FY18 Q2FY19 YoY% QoQ%

Total Income 18130.42 14314.63 15959.37 26.66 13.60

Total Expenses 12605.77 10460.83 11865.37 20.50 6.24

Pre Provision Profit 5524.65 3853.80 4094.00 43.36 34.95

Provision 3054.51 2811.04 2927.38 8.66 4.34

PBT 2470.14 1042.76 1166.62 136.88 111.73

Tax 789.29 316.32 377.01 149.52 109.36

PAT 1680.85 726.44 789.61 131.38 112.87

EPS 6.54 2.83 3.07 130.86 113.03

NIM% 3.47 3.60 3.59 (3.61) (3.34)

CAR % 15.81 17.50 16.17 (9.66) (2.23)

GNPA % 5.75 5.28 5.96 8.90 (3.52)

NNPA% 2.36 2.56 2.54 (7.81) (7.09)

Past Price movement of the stock


13 20 27 3 10

September

17 24 1 8

October

15 22 29 5 12

November

19 26 3 10

December

17 24 31

2019

7 14 21 28 4

February

11 18 25 4

March

11 18

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SENSEX (36,018.49, 36,140.67, 35,952.41, 36,063.81, +196.367), AXIS BANK (713.950, 715.000, 700.000, 703.100, -6.25000)


[email protected]

HEM SECURITIES LIMITED

MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER

Sebi Registration No For Research Analyst: INH100002250

MUMBAI OFFICE: 904, A WING. 9TH FLOOR, NAMAN MIDTOWN, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, LOWER PAREL ,MUMBAI -400013 PHONE- 0091 22 49060000 FAX- 0091 22 2262 5991

JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001 PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757

GROUP COMPANIES

HEM FINLEASE PRIVATE LIMITED

MEMBER-NSE

HEM MULTI COMMODITIES PRIVATE LIMITED

MEMBER-NCDEX, MCX

HEM FINANCIAL SERVICES LIMITED

NBFC REGISTERED WITH RBI

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are

not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an

offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his

own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited,

Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem

Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further

agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all

losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers,

directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the

securities there of, company (ies) mentioned herein and the same have acted upon or used the information prior to, or immediately following the publication.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement

1. Analyst Ownership of the stock No

2. Hem & its group companies ownership of stock Yes

3. Hem & its group companies director ownership of stock No

4. Broking relationship with the company covered No

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