Finance Minister Arun Jaitley in the Union Budget 2015 proposed to remove distinction between the foreign direct investment (FDI) and foreign institutional investors (FIIs). The move is likely to benefit private sector banks like Axis Bank and YES Bank .
Speaking to CNBC-TV18, Axis Bank MD and CEO Shikha Sharma said the bank needs shareholder approval to raise FII limit to 74 percent. As of now, private banks have a total foreign limit of 74 percent, of which FII limit is 49 percent. The current foreign holding in Axis Bank is 52 percent whereas foreign limit is at 62 percent.
On Budget, Sharma said focus on fiscal discipline was a pragmatic move. Simplification of tax code, processes and approvals is a big positive for the industry. According to her, infra-related sectors should benefit from the Budget with focus on affordable housing being of great significance.
The country's third largest private sector lender maintains its guidance for stressed assets for this year at around Rs 6,500 crore.
Below is verbatim transcript of her interview with Latha Venkatesh on CNBC-TV18.
Q: Were you impressed by the Budget. If yes, what impressed you?
A: The first thing was fiscal discipline without getting wedded to a particular number. Having the flexibility to say that we need to kick start investment and therefore, instead of 3.6 percent we go for 3.9 percent number. I thought that was a great pragmatic move, one.
Related to kick starting investment in infrastructure, recognising that private investment would take some time to come back given that there are projects that were stuck and need to be taken to closure and companies are leveraged therefore may not have the capacity to kick start investment.
I think that was a great positive too. Third, a lot of steps were around simplification and taking away all items of friction. So whether it was simplification of tax code or it was simplification of processes and approvals required to start a business or even things like fungibility between FDI and FIIs which all of us have talked about for a long time was an unnecessary inefficiency in the market.
We saw lot of steps towards simplification and rationalisation. Therefore, those were the three strongest things from the Budget – (1) pragmatism of fiscal deficit (2) kick starting the investment cycle and (3) removing friction wherever there was an opportunity to do so.
Q: What is the current position of limits available?
A: Our total foreign holding right now is around 52 percent and once we get shareholder approval for going up to 74 percent – that does give a lot more headroom for FIIs to buy Axis' stock.
Q: As a banker what sectors do you think will benefit the most post the Budget?
A: I think infrastructure-related sectors should definitely benefit. If the government is going to kick start investment through doing more roads, privatising ports then that will help feeder sectors like cement, steel, the construction industry and that in-turn should generate employment. The focus on creating affordable housing should be a positive on jobs and some of the core sectors. Therefore, the recovery will start from there.
Axis Bank stock price
On March 02, 2015, at 11:14 hrs Axis Bank was quoting at Rs 633.90, up Rs 20.50, or 3.34 percent. The 52-week high of the share was Rs 642.85 and the 52-week low was Rs 247.44.
The company's trailing 12-month (TTM) EPS was at Rs 29.66 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 21.37. The latest book value of the company is Rs 161.50 per share. At current value, the price-to-book value of the company is 3.93.
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