Motilal Oswal Financial Services

25 June 2019

Annual Report Update | Sector: Financials

Axis Bank

BUY

BSE SENSEX

39,435

S&P CNX

11,796

CMP: INR782

TP: INR925 (+18%)

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Strategy + Team in place; execution remains the key

Operating metrics to improve gradually; estimate FY21 RoA at ~1.4%



Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

AXSB IN

2,572

2047.6 / 29.5

827 / 499

-1/16/41

6858

81.8

Axis Bank’s (AXSB) annual report analysis reveals the bank’s focus on improving its

earnings metrics and asset quality. As part of its FY20-22 strategy, AXSB targets an

RoE of 18% by FY22, with credit cost, opex and business mix identified as the key

drivers for the achievement of this goal.

Digital initiatives at the bank are gaining traction, with 43% of its personal loans

sourced digitally versus 22% in FY18. Also, the bank’s market share in credit cards

expanded to 12.4% from 5% in FY13, helping it become the fourth largest credit card

issuer in the country.

The concentration in top 20 advances/exposures improved by 171bp/86bp YoY to

8.6%/12.4% in FY19. However, on the liability side, the concentration of top-20

depositors increased by 39bp YoY to 11.8%. The bank has shifted its deposit strategy

away from CASA to ‘CASA + retail term deposits’.

Though the bank has strong management team and a well-articulated strategy in

place the execution is going to be critical to deliver long-term sustainable growth and

earnings. NPL cycle has shown improvement signs and we estimate earnings to

recover though credit cost trajectory can still remain uneven given sluggish macro.

We thus estimate RoA/RoE to improve to 1.4%/17.0% by FY21 and maintain our Buy

rating with a TP of INR925 (2.7x FY21E ABV + INR42 for subsidiaries).

Financials Snapshot (INR b)

Y/E March

FY19 FY20E FY21E

NII

NIM (%)

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

ABV/Sh. (INR)

RoE (%)

RoA (%)

Valuations

P/E(X)

P/BV (X)

P/ABV (X)

217.1

190.1

46.8

3.2

18.2

259.3

219.7

7.2

0.6

42.9

3.0

3.6

250.8

231.4

103.8

3.2

40.0

119.8

301.0

269.2

14.3

1.2

19.5

2.6

2.9

295.3

285.7

145.7

3.2

55.7

39.1

353.2

323.5

17.0

1.4

14.0

2.2

2.4

Retail franchise strengthens; deposit strategy focused on ‘CASA + retail TD’

The contribution of retail book has increased to 50% from 32% in FY14, even as the

bank has consciously lowered the share of housing loans in its retail mix to 47%

from 55% in FY15. The proportion of higher-yielding retail loans – comprising

mainly personal loans, credit cards and small business banking (SBB) – has

increased from 9% in FY13 to 20%. On the liability side, the share of CASA and

retail term deposits has been largely stable at ~81% though bank has guided for a

change in deposit strategy, with focus shifting from CASA to ‘CASA + Retail TD.’

Business productivity improving; aggressive focus on increasing branch count

AXSB’s business per branch improved from INR2.4b in FY18 to INR2.6b in FY19,

while business per employee improved from INR150m to INR168m over the same

period. However while the focus on increasing branch count stays high the bank

has relatively lower deposit productivity (SA per branch) when compared to other

private peers. Notably, AXSB’s management has guided for a further rise in the

number of branches to 5,000 from 4,050 currently.

Shareholding pattern (%)

As On

Mar-19 Dec-18 Mar-18

Promoter

18.2

23.1

26.4

DII

20.7

19.0

12.8

FII

51.0

48.7

52.2

Others

10.2

9.3

8.7

FII Includes depository receipts

Fee income getting granular; credit card segment forms ~23% of total fees

Retail and transaction banking fees now form ~81% of total fees (77% 5years ago),

signifying the increasing granularity of fee income. This is primarily driven by cards

and third-party distribution fees, which together constitute 36% of total fees. The

credit card business is showing a robust performance, with its market share up by

~1.8x over the last five years. The efficient use of data analytics, along with higher

digital transaction volumes, has led to increased volumes for several retail

segments, which, in turn, is helping build good traction in retail fees.

Research Analyst: Nitin Aggarwal

(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |

Parth Gutka

(Parth.Gutka@motilaloswal.com); +91 22 6129 1567

Alpesh Mehta

(Alpesh.Mehta@MotilalOswal.com) |

Himanshu Taluja

(Himanshu.Taluja@motilaloswal.com) |

Yash Agarwal

(Yash.Agarwal@motilaloswal.com)

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Axis Bank

Stock Performance (1-year)

RWA density improves; deposit concentration deteriorates slightly

The bank has shifted its focus toward increasing the proportion of low risk-weighted

assets on the balance sheet, and as a result, RWA density improved by 373bp in

FY19 (736bp since FY16). Further, the concentration in top 20 advances/exposures

improved by 171bp/86bp YoY to 8.6%/12.4% in FY19. On the liability side, the

concentration of top-20 depositors increased marginally by 39bp YoY to 11.8%.

Maturing NPL buckets imply lower ageing provisions; NPA concentration

remains stable

Around 42% of NPAs lie in D2 category, as against average of 25% over past three

years. Proportion of loss assets increased to 14% as bank wrote down INR92b of

loans in FY19 v/s ~INR117b in FY18. The asset quality ratios have improved, with

slippages moderating to ~INR139b (INR334b in FY18) and quantum of BB and below

pool declining sharply to INR75b. As per the exchange filing of Rcom, AXSB’s non

funded exposure stands at INR20.9b and further developments on this front (matter

is sub-judice) would drive the provisioning requirements here. AXSB has adopted a

more stringent provisioning policy on corporate advances rated 'BB and below' and

all SMA-2 advances and made total additional provisions of INR3.8b during FY19.

The concentration of top 4 NPA accounts remains stable at ~15% in FY19.

Subsidiaries performance on track (barring Axis Capital)

AXSB’s subsidiaries barring Axis Capital have exhibited healthy performance in FY19.

Over the past years, subsidiaries have demonstrated strong growth and amassed

critical size, though contribution to overall profitability remains marginal. The bank

aims to scale up its subsidiaries/developing businesses before focusing on

profitability. Eventually, the bank aims to rank among the top-five across businesses.



Axis AMC

reported a healthy PAT growth of 28% YoY to INR550m with an

average AUM of INR845.4b (+19.2% YoY) while

Axis Securities

PAT grew 23%

YoY to INR745m with non-broking business comprising 81% of the total business



Axis Finance

PAT grew 8% YoY to INR2.27b with a loan book of INR80.4b (+21%

YoY) while

Axis Capital

performance remained weak amidst volatile markets.

Other key highlights



Average increase in remuneration of employees stood at 9.6% (increase in

median remuneration was 10.7%). For managerial personnel the same was 7%.

Total exposure toward land parcels is at INR22.1b, on which AXSB has made

provisions of INR6.03b and the balance amount has been debited to reserves.

Contingent liabilities grew marginally at ~3% in FY19 (5.6% CAGR over FY14-19),

resulting in a decline in its proportion to 94% of total assets from 106% in FY18

(150% in FY14). This was driven by 11% fall in outstanding guarantees.

Valuation and view

AXSB has been aiming for sustained improvement in its earnings profile under the

new management and has delivered a steady performance during FY19 with sharp

improvement in coverage ratio. The NPL cycle has shown improvement signs and we

estimate earnings to recover though credit cost trajectory can still remain uneven

given sluggish macro. We thus estimate RoA/RoE to improve to 1.4%/17.0% by FY21

and maintain our Buy rating with a TP of INR925 (2.7x FY21E ABV + INR42 for

subsidiaries).

25 June 2019

Axis Bank

Deposit strategy focused on ‘CASA + retail term deposits’

The bank has shifted its deposit strategy to focus on ‘CASA + retail term deposits,’ as

against its prior focus on CASA. CASA + retail TD are at ~81% of total deposits, which

has helped the bank to maintain a strong control on funding cost, particularly during

the period of high interest rates and tight liquidity in 2HFY19. In FY19, term deposit

growth (+45% YoY) far exceeded deposit growth (+21% YoY), primarily due to a

flattish trend in CASA. Also, cost of deposits/cost of funds for the bank increased by

31bp/26bp after bottoming out in FY18, largely on account of the tight liquidity

conditions in 2HFY19.

Exhibit 1: CASA + retail TD constitute ~81% of total deposits,

enabling strong control on cost of funds

Retail TD

30%

Exhibit 2: Bank has shifted its deposit strategy to focus more

on term deposits

Deposits gr

Term deposit gr

33%

34%

30%

37%

28%

17%

FY14

27%

17%

FY15

30%

18%

FY16

30%

21%

FY17

33%

21%

FY18

28%

16%

FY19

FY13

FY14

FY15

FY16

FY17

FY18

FY19

Source: Company, MOFSL

Exhibit 3: AXSB’s deposit cost compares favourably to peers

AXSB

10.0

8.0

6.0

4.0

2.0

HDFCB

ICICIBC

IIB

KMB

YES

Exhibit 4: Helping it maintain competitive funding cost

AXSB

10.0

8.0

6.0

4.0

2.0

HDFCB

ICICIBC

IIB

KMB

YES

Source: Company, MOFSL

Loan growth driven by retail segment; mix of overseas down to ~8%



AXSB delivered a loan book CAGR of 16% over FY15-19, driven largely by retail

book CAGR of 22%. Corporate book growth was muted at 10% over this period.

Contribution of retail book to total book has increased to 50% (+300bp YoY)

from 32% in FY14, even as it has consciously lowered the share of housing loans

in the overall retail mix to 47% from 55% in FY15.

The proportion of higher yielding retail loans, comprising mainly of personal

loans, credit cards, small business banking (SBB), has increased consistently to

20% in FY19 from 9% in FY13.

The bank has been focusing on granularization of its retail portfolio. Unsecured

loans comprise 19% of the total retail portfolio, with personal loans and credit

cards accounting for 12% and 5%, respectively.

Mix of overseas loans declined from 16.3% in FY15 to 7.7% in FY19.

25 June 2019

Axis Bank

Exhibit 5: Retail loan CAGR at 22% over FY15-19, as against

15% CAGR in total loans

Retail Loans (INRb)

Retail as a % of Total adv

40% 41%

20% 19% 22%

27%

32%

45% 47%

50%

Exhibit 6: Within retail, majority of loans are secured in

nature

Secured retail (%)

20%

UnSecured retail (%)

16%

25%

29%

36%

40%

41%

Source: Company, MOFSL

Note: as a % of total loans. Source: Company, MOFSL

Exhibit 7: Proportion of term loans (large & mid corporate)

has come down significantly to 66% from 80% 1QFY17

Term loan (%)

W.capital (%)

Exhibit 8: Proportion of overseas loans has declined to 8%

from 16% in FY15

Overseas adv (INRb)

16%

15%

11%

12%

as a % of overall loans

Source: Company, MOFSL

Business productivity improving; aggressive focus on increasing branch

count

Business per branch of AXSB has improved from INR2.4b in FY18 to INR2.6b in FY19,

while business per employee has also bettered from INR150m in FY18 to INR168m

in FY19. With ~84% of its branches concentrated in the semi-urban and urban

regions, AXSB has been able to improve its business productivity.

However, even though AXSB continues with its branch expansion strategy, its

branch productivity in terms of SA per branch is the lowest compared to peers such

as KMB, which has reflected the highest improvement on this front. Management

has further guided to increase its branch count to 5,000 as it expects branches to

play an important role in deposit mobilization from new customers. This will also

help drive the bank’s acquisition strategy across products/services and build trust.

25 June 2019

Axis Bank

Exhibit 10: Business/employee improved to INR168m v/s

INR120m in FY14

Employees

Business/ employee (RHS, INRm)

Exhibit 9: Business/branch consistently improving

Branches

Business/ branch (RHS, INRm)

Source: Company, MOFSL

Exhibit 11: Business/branch across peers – FY19

Business/ branch (INRm)

2,543

2,576

2,877

3,415

Exhibit 12: Branch concentration across regions

665

Rural

Semi-Urban

1,260

1,185

Metro

Urban Branches

930

2,290

Source: Company, MOFSL

Exhibit 13: SA per branch over the years…

SA/branch (INRm)

344

319

328

324

341

364

382

400

381

Exhibit 14: Lowest SA/branch among peers due to

continuous focus on branch expansion

SA/Branch…

417

467

487

531

294

332

381

IIB

Source: Company, MOFSL

AXSB

YES

ICICIBC

HDFCB

KMB

Source: Company, MOFSL

Operating efficiency to improve gradually led by higher productivity

AXSB continues investing in its branch infrastructure, leveraging technology to

support its business growth. The average cost to assets ratio stood at ~2.1-2.2% over

FY15-19. The bank has been focusing strongly on leveraging technology to increase

volumes in the retail segments and maintain control over its operating expenses.

Although management has guided to increase its branch count to 5,000 (v/s ~4,050

now) over the next few years, the branch formats will tend to get smaller with

enhanced productivity, led by automation and digitalization of service operations.

This will aid in improving efficiency, and thus, we expect opex to average assets to

decline to ~2.0% by FY21.

25 June 2019

Axis Bank

Exhibit 15: Cost to average assets has been stable over the

years

Employee exp to assets

Other exp to assets

Exhibit 16: Expect cost to avg. assets to decline to ~2.0% by

FY21

C/I ratio (%)

Cost/Assets (%)

1.5 1.5 1.4 1.4

1.5 1.5 1.5 1.4 1.5 1.4

1.4 1.5

0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.7

0.6 0.6 0.6

Source: Company, MOFSL

Exhibit 17: Branch expansion strategy continues…

Incremental branches

23.4

% of opening branches

Exhibit 18: The pace of employee addition continues to

moderate…

19.4

Incremental emp.

18.7

11.9

12.9

5.3

6,163

4,519

(0.4)

(190)

7,905

6,482

2,997

2,326

3.9

% of opening emp.

20.0

12.2

7.8

325

455

187

315

13.8

12.1

9.4

400

399

347

Source: Company, MOFSL

AXSB is the fourth largest

credit card issuer with a

market share of 12.7%

Fee income getting granular; credit card segment forms ~23% of total fees

Retail and transaction banking fees formed ~81% of total fees in FY19, signifying the

granularity of fee income. This was primarily driven by card fees (+30% YoY) and

third party distribution fees (+12% YoY), which together constituted ~36% of total

fees. Bancassurance income grew 13% YoY led by insurance business and forms 15%

of the total retail fees. On the other hand, fees from transaction banking/treasury

grew at 13% YoY. The gradual revival in corporate banking fees, along with a pickup

in the credit cycle, is likely to further boost overall fee intensity.

AXSB’s credit card business is showing a robust performance, with its market share

expanding by ~1.8x over the last five years. It is currently the fourth largest credit

card issuer, with a total card base of 6m (market share of 12.7%). Spends grew 40%

YoY in FY19, with a total market share of 10.2%. Moreover, AXSB commands a

market share of ~38% in forex cards (ranks first) and 14% in POS terminals (ranks

third). Further traction in the credit cards business will only boost the bank’s overall

RoA.

25 June 2019

Axis Bank

Exhibit 19: 81% of total fee income is now driven by

retail/transaction banking

Retail (card)

19%

23%

Retail (Non- Card)

20%

38%

Transaction

banking/Treasury

Corporate

credit/SME

Source: Company, MOFSL

Exhibit 20: Total fee income constitutes ~1.4% of average

assets

Fee Income (INRb)

2.0% 2.0% 2.0% 1.9% 2.0%

Fee as % of total assets

1.7% 1.7%

1.5% 1.5%

1.4%

Exhibit 21: Bancassurance fees forms ~15% of the total retail fees

Bancassurance Business (INRm)

Sale of Life insurance

sale of Non-Life insurance

Sale of MF

Others

Total

FY15

4,913

224

3,144

342

8,623

FY16

4,919

234

3,114

571

8,838

FY17

5,582

330

3,174

886

9,972

FY18

5,395

564

3,885

885

10,728

FY19

6,405

686

4,061

991

12,143

YoY (%)

19%

22%

12%

13%

Exhibit 1:

Strong market position across digital payments products

Source: MOFSL, Company

AXSB has ~38% market

share in the forex cards

business.

Exhibit 22: AXSB is the fourth largest issuer in terms of outstanding credit cards

Market Share (%)

HDFCB

SBIN

ICICIBC

AXSB

CITIBANK

FY13

33.6%

13.2%

14.7%

5.6%

12.1%

FY14

26.8%

14.9%

16.6%

7.2%

12.6%

FY15

28.3%

15.0%

15.8%

8.2%

11.4%

FY16

29.7%

14.8%

14.9%

9.8%

FY17

28.6%

15.3%

14.3%

11.2%

8.5%

FY18

28.5%

16.7%

13.3%

12.0%

7.1%

FY19

26.5%

17.6%

14.1%

12.7%

5.8%

Source: Company, MOFSL

25 June 2019

Axis Bank

Exhibit 23: Credit cards spends market share stood at

10.2%...

Credit cards market share

Credit spends market share

8.7%

9.6%

10.2%

95.2

79.6

7.2%

8.2%

9.8%

11.2%

12.0%

12.7%

99.2

Exhibit 24: …while debit card spends were up 34% YoY

Debit cards spends (INRb)

131.7

Credit cards spends (INRb)

144.1 143.1

167.8 165.8

3.9%

5.6%

5.7%

7.1%

7.5%

117.3

75.6

87.2

86.8

101.7 105.2

122.7 116.5

Source: Company, MOFSL

Exhibit 25: Mobile banking spends continue to grow

strongly…

Mobile transaction volume (INRm)

Mobile banking spends (INRb)

853

1,013

1,186

Exhibit 26: …and it ranks third in terms of mobile

transaction market share

Mobile transaction Mkt share by value

375

414

510

100

628

714

14.6%

142

252

243

14.6%

12.4%

Peer 3

Peer 1

Source: Company, MOFSL

Peer 2

AXSB

Source: Company, MOFSL

Contingent liability mix declining steadily; o/s guarantees declines 11% YoY

Contingent liabilities for the bank grew marginally by ~3% in FY19 (5.6% CAGR over

FY14-19), resulting in a decline in its proportion to 94% of total assets v/s 106% in

FY18 (150% in FY14). This was largely due to a decline in guarantees given (-11%

YoY) and currency options, which contributed to the decline in fee income of the

bank.

Exhibit 27: Contingent liabilities constitute 94% of total assets

Contingent Liabilities (INRb)

Claims not acknowledged as debt

Outstanding forward exch. contracts

Guarantees given in India

Guarantees given outside India

Acceptances, Endorsements etc.

Currency options

IRS, currency swaps and IRF

Others

Total

% of total assets

FY14

2,313

530

134

239

203

2,299

5,748

150%

FY15

2,801

583

138

316

238

1,642

191

5,912

128%

FY16

2,557

558

128

295

429

1,797

408

6,174

118%

FY17

2,682

764

335

494

2,011

358

6,696

111%

FY18

3,148

763

324

593

1,961

472

7,353

106%

FY19

3,297

681

324

464

2,376

335

7,558

94%

Source: MOFSL, Company

25 June 2019

Axis Bank

Strong digital sourcing and cross-selling opportunities to further drive fee

income

AXSB has been focusing on cross-sell strategy with ~96%/92% of credit

cards/personal loans being extended to existing customers. Efficient use of data

analytics, along with an increase in volume of digital transaction, has helped boost

volumes for several retail segments. This, in turn, has helped build traction in retail

fee income and maintain strong control on delinquencies/operating expenses.

Exhibit 28: AXSB cards are being increasingly used for merchant payments rather than

ATMs (Nos. in million)

Card usage at Merchants

Card usage at ATMs

122

110

119

Source: Company, MOFSL

Exhibit 29: Cross-sell metrics remain healthy aided by data

analytics

Personal Loans

97%

96%

82%

Entire Retail loans

97%

85%

97%

87%

90%

78%

97%

Credit Cards

96%

93%

96%

92%

83%

Exhibit 30: Digital channels contributing ~77% of total

transactions

Branch

67%

65%

66%

ATM

70%

Digital

72% 75%

77%

79%

73%

79%

23%

10%

26%

25%

22%

19%

74%

76%

82%

83%

17%

Source: Company, MOFSL

Exhibit 31: Proportion of savings a/c sourced through tab

banking

Digital

Physical

37%

Exhibit 32: Proportion of personal loans sourced through

digital channels

Digital

Physical

61%

57%

52%

51%

45%

50%

48%

86%

83%

74%

70%

69%

55%

53%

54%

39%

43%

48%

49%

55%

63%

50%

52%

14%

17%

26%

30%

31%

45%

47%

46%

Source: Company, MOFSL

25 June 2019

Axis Bank

BB and below book declines to 1.5% of loans;

concentration of top four NPA accounts remains stable

87% of corporate slippages came from BB & below pool

Asset quality ratios improved in FY19, with slippages moderating to ~INR139b from

INR334b in FY18. During the year, the quantum BB and below pool reduced

materially to INR75b v/s INR90b in FY18. In FY19, the bank added INR62b of

corporate slippages, of which 87% came from BB and below pool.

Slippages as a percentage of loans moderated to 3% in FY19, which, coupled with

healthy recoveries, led to a decline in GNPAs from INR342.5b (7.8%) in FY18 to

INR298b (6.0%). During the same period, the bank raised its PCR from 51.6% (65%

including tech. w/off) to 62.1% (77% including tech. w/off), resulting in an

improvement the NNPL ratio from 3.4% to 2.1%.

AXSB’s performance underscores the asset quality recovery that is getting evident

across other corporate banks. The bank has already increased the reported PCR to

77% (86% coverage on NCLT assets as of 3QFY19), which will further curb

incremental provisioning requirement. As a matter of prudence, management has

decided to move to a more conservative provisioning policy, going ahead. Thus, in

4QFY19, the bank made higher standard asset provisions against certain self-

identified ‘stressed sectors’ and also created provisions against the pool of security

receipts and non-banking assets (as directed by RBI). We, thus, estimate credit cost

to moderate to 0.9% by FY21 and are mindful of further improvement here (FY11-15

credit cost of ~66bp).

Exhibit 33: Asset quality continues to improve; expect

GNPL/NNPL ratio to decline to 3.4%/1.1% by FY21

GNPA (%)

71%

67%

68%

59%

NNPA (%)

59%

52%

62%

PCR (%)

67%

69%

Exhibit 34:

Slippages and credit costs are expected to revert

to their normalized levels

slippages (%)

Credit cost (%)

Avg credit cost

(FY11-15) : 70bp

Source: Company, MOFSL

FY18

Specific

Provisions

(INRb)

FY19

Specific

Provisions

(INRb)

Exhibit 35: Bank has significantly increased its exposure to stressed sectors

Risk based exposure

Iron and Steel

Power

Infra (excl. Power)

Commercial real estate

Engineering

Construction

Banking and Finance

GNPA

(INRb)

FY17

Specific

Provisions

(INRb)

PCR (%)

GNPA

(INRb)

PCR (%)

GNPA

(INRb)

PCR (%)

Source: Company, MOFSL, Basel III disclosures

25 June 2019

Axis Bank

Around 42% of NPA in ‘Doubtful 2’ category v/s average of 25% over past

three years

Net stressed loans have declined from 10.8% of total loans (INR374b) to 4.4%

(INR217b) – the lowest among the past 12 quarters. Around 42% of the NPAs lie in

the D2 category, as against average of 25% over past three years. Proportion of loss

assets increased to 14% as the bank wrote down INR92b of loans in FY19 v/s

~INR117b in FY18. Further the concentration of top 4 NPA accounts declined from

23% in FY17 to 15% in FY19. GNPAs for the priority and non-priority sectors have

bettered in the current year, with a major improvement seen in the industry sector.

Exhibit 36:

Net stressed loans down to 4.4% from 10.8% in

1QFY17

10.8

Net stress loans (INR b)

10.0 9.4

8.4 8.6 8.1

% of Advances

37%

4.4

14%

22%

26%

FY15

Source: Company, MOFSL

Exhibit 37:

~42% of NPAs in D2 category vs average of 25%

over past three years

Substandard

23%

28%

21%

27%

FY16

25%

20%

26%

27%

FY17

29%

42%

34%

22%

23%

FY18

17%

FY19

Loss

14%

7.4

6.4 6.7 5.8

5.2

374 352 325 312 333 333 313 284 298 265 248 217

Source: Company, MOFSL

Exhibit 38: NPA classification under different buckets across banks

As a % of GNPA

Sub Standard

Doubtful

Doubtful 1

Doubtful 2

Doubtful 3

Loss

Total GNPL (INRb)

AXISB

FY17

27%

48%

26%

20%

25%

213

FY19

17%

69%

22%

42%

14%

298

ICICIB

FY17

34%

61%

32%

27%

455

FY19

13%

81%

11%

56%

14%

486

SBI

FY17

25%

73%

25%

40%

1,792

FY19

15%

79%

20%

45%

14%

1,736

BoB

FY17

21%

68%

22%

37%

11%

434

FY19

19%

66%

22%

30%

14%

15%

491

Source: MOFSL, Company

Exhibit 39:

BB and below book declined to its multi-quarter

low at 1.5% of total advances

BB and Below

7.9%

6.2% 6.0%

5.3% 5.0%

3.9% 3.8%

90 104 89

As a % of advances

Exhibit 40:

Concentration of top 4 NPA accounts remains

stable at ~15% of gross NPA

Top 4 NPA Acc (INRm)

20.7%

22.7%

18.4%

top 4 NPA Acc/Gross NPA

23.4%

15.6%

15.2%

2.0% 2.4% 1.9% 1.6% 1.5%

6,508

9,313

11,211

49,839

53,401

45,136

274 219 208 197 195 158 161

Source: Company, MOFSL

25 June 2019

Axis Bank

Exhibit 41: Overall GNPAs for priority and non-priority sector improved with large improvement in loans to industry

INR b

Priority Sector

Agriculture

Industry

Services

Personal loans

Total (A)

Non-Priority Sector

Agriculture

Industry

Services

Personal loans

Total (B)

Total (A+B)

FY16

O/s advances GNPA (%)

228

172

153

270

824

1,230

541

828

2,599

3,423

2.4%

1.8%

0.7%

1.6%

2.3%

2.1%

0.7%

1.8%

1.7%

FY17

O/s advances GNPA (%)

259

203

159

329

950

1,246

670

981

2,897

3,847

3.3%

3.1%

2.7%

0.8%

2.3%

10.7%

5.5%

0.9%

6.2%

5.2%

FY18

O/s advances GNPA (%)

276

235

172

316

1,000

1,327

906

1,312

3,545

4,545

3.9%

3.7%

3.4%

1.7%

3.1%

17.2%

3.9%

1.1%

7.8%

6.8%

FY19

O/s advances GNPA (%)

278

269

211

447

1,206

5.5%

3.4%

0.8%

2.9%

1,451

12.7%

912

4.3%

1,542

0.8%

3,905

6.1%

5,111

5.3%

Source: Company, MOFSL,

RWA density improves; deposit concentration deteriorates slightly

AXSB has a tier-1 ratio of 12.5% (CET 1 of 11.3%), while total CAR stands at 15.8%.

Post warrant conversion (conversion price is INR565, due date: 1QFY20), Tier-1

levels will increase by ~40bp but still remain below those of peers. During the year,

the bank shifted its focus on increasing the proportion of low risk weighted assets

on the balance sheet. Consequently, RWA density improved by 373bp in FY19 alone

(736bp since FY16). Further, the concentration of top 20 advances/exposures

improved by 171bp/86bp during the year. On the liability side, the concentration of

the top-20 depositors increased marginally by 39bp to 12%.

Exhibit 42: Concentration of top 20 advances/exposures

declined to 9%/12% in FY19

Top 20 Dep

20%

18%

16%

14%

12%

10%

8.6

10.6

11.8

AXSB

Source: MOFSL, Company

6.1

HDFCB

10.8

YES

12.2

KMB

12.4

11.1

13.3

Top 20 Adv

Top 20 Exposures

Exhibit 43: Concentration ratios across banks; AXSB well

placed

Top 20 Dep

Top 20 Adv

Top 20 Exposures

13.5

9.1

9.0

12.6

3.1

SBIN

8.4

7.3

BOB

12.8

14.1

Source: MOFSL, Company

25 June 2019

Axis Bank

Exhibit 44: RWA density improved to 71% from 81% in FY12

RWA to tot assets (%)

78%

81% 81%

76%

74%

76%

Credit RWA to tot assets (%)

79% 79%

75%

71%

Exhibit 45: RWA density across major peers

RWA to tot assets (%)

71.1

80.3

59.5

70.4

77.2

Credit RWA to tot assets (%)

65.9

54.6

43.3

54.9

47.4

68%

70% 69%

65% 64% 65% 66%

68%

63%

60%

AXSB

YES

IIB

SBIN

BOB

Source: MOFSL, Company

Exposure toward NBFC/CRE

stood at 2%/2.4% as of FY19

Exhibit 46: Exposure toward NBFC and commercial real estate

INRm

NBFC

% of Fund based o/s

Commercial Real Estate

% of Fund based o/s

FY15

39,006

0.9%

1,12,570

2.7%

FY16

54,807

1.1%

1,63,088

3.4%

FY17

86,748

1.5%

1,41,652

2.5%

FY18

97,415

1.5%

1,46,870

2.3%

FY19

1,51,356

2.0%

1,82,504

2.4%

Source: MOFSL, Company

25 June 2019

Axis Bank

Subsidiaries performance on track (barring Axis Capital)

AXSB’s subsidiaries barring Axis capital have exhibited healthy performance in FY19.

Axis capital performance though remained weak amidst volatile markets. Over the

past years, subsidiaries have demonstrated strong growth and amassed critical size,

though contribution to the overall profitability remains marginal. The bank aims to

scale up its subsidiaries/developing businesses before focusing on profitability.

Eventually, the bank aims to rank among the top-five across business segments.

Axis Finance: Strong loan growth continues

Delivered loan book CAGR

of 49% and PAT CAGR of

47% over FY14-19



Axis Finance Limited – the bank’s fast growing NBFC catering to the unique

financing requirement of retail and wholesale customers – carries on the

activities of loan against shares, margin funding, IPO financing, etc.

Axis Finance Limited delivered a loan book CAGR of 49% over FY14-19 to reach

INR80.4b (wholesale: retail mix at 85%:15%).

PAT grew from INR335m in FY14 to INR2.3b in FY19 (CAGR of 47%), with the

margins at 4.37%. NPA ratio for the bank stood at 0.35%, while the return ratios

remained healthy.

Exhibit 48: …with total income/PAT CAGR of 64%/47% over

the similar period

Total Income (INRm)

PAT (INRm)

Exhibit 47: Loan book CAGR of 49% over FY14-19…

Loan book (INRm)

Source: MOFSL, Company

Axis AMC: Gaining market share in MF industry

Total investor folio stood at

3.9m with market share of

3.67%.



Axis Asset Management Company Ltd. undertakes the activities of managing the

mutual fund business.

In FY19, Axis AMC reported 19% YoY growth in average AUM. It reported AUM

CAGR of 38% to INR845.4b over FY15-19.

Profit stood at INR550m for FY19.

Axis AMC has added 1.2m customers over the past year, taking its overall

investor folio to 3.9m; market share stood at 3.67% as of FY19.

25 June 2019

Axis Bank

Exhibit 49: AUM CAGR of 38% over FY15-19; AUM at

INR845.4b as on FY19

AUM (INRm)

68.5%

41.2%

47.2%

45.2%

19.2%

316

FY15

FY16

FY17

FY18

9MFY19

FY15

FY16

FY17

FY18

FY19

570

550

Growth (%)

Exhibit 50: PAT CAGR of 62% over the similar period

PAT (INRm)

430

Source: MOFSL, Company

Axis Securities: Exhibiting strong growth in customer additions

PAT CAGR of 44% over

FY14-19



Axis Securities Ltd. is primarily engaged in the business of marketing of credit

cards and retail asset products. It also provides retail broking services. Axis

Securities continued contributing toward the bank’s retail franchise building

strategy and strengthening the bond with its customers.

In FY18, Axis Securities reported 33% growth in its cumulative client base to 1.84

million (2.02m as on 3QFY19).

The subsidiary delivered a CAGR of 28% in revenue and 44% in PAT over FY14-

19.

Around 81% of total income is contributed by the non-broking business, helping

it to ride against the cyclicality and volatile nature of the business.

Exhibit 52: ~81% of income coming from non-broking

business

FY19

10,860

745

Non Broking

Broking

Exhibit 51: Total income CAGR of 28% over FY14-18

FY14

PAT (INRm)

122

FY15

441

FY16

357

FY17

515

FY18

604

Total Income (INRm) 3,145 4,549 5,619 7,561 9,505

Source: MOFSL, Company

Axis Capital: Weak performance; though maintaining leadership position

amid challenging markets

Axis Capital maintained its

leadership in terms of

number of deals;

successfully closed 13 deals

in FY19.



Axis Capital provides services relating to investment banking, equity capital

markets, institutional stock broking, mergers and acquisition advisory, etc.

This subsidiary has been the leader in equity and equity linked deals over the

last decade and had another great year with 13 deals.

It delivered a CAGR of 5% in income and 24% in PAT over FY14-19. The

performance was muted in FY19 amid volatile capital markets with its earnings

declining by 44%, but the company managed to maintain its leadership position.

25 June 2019

Axis Bank

Exhibit 53: Healthy performance over the years, but FY19 was impacted by muted activity

and volatility in capital markets

Total Income (INRm)

PAT (INRm)

Source: MOFSL, Company

Other key highlights from the annual report



The bank changed two accounting policies during the year:



Additional provision on standard advances: The bank adopted a more

stringent policy of provisioning on corporate advances rated ‘BB and below’

and all SMA-2 advances at rates over and above the prescribed RBI

guidelines. It, thus, made additional provisions of INR3.8b in FY19.



Change in estimated useful life of fixed assets: AXSB has revised the

estimated useful life of electronic data capturing machines/point of sale

terminals from 10 to 5 years. As a result, the depreciation charge for the

year was higher by INR293.4m.

The outstanding pool of security receipts stands at INR29.1b (v/s INR29.2b in

FY18), on which bank is carrying a provision of INR2.2b.

The bank’s fund-based exposure towards ILFS and its group entities stands at

INR2.67b, while non-fund-based exposure is at INR4.52b.

Exhibit 54: ILFS exposure

Exposure

INRb

Funded exposure

2.67

Non-Funded Exposure

4.51

Total Exposure

7.18

Exposure which is NPAs as per IRAC norms but not classified as NPA (Fund based)

0.14

Provisions actually held

0.55

Source: MOFSL, Company



Total exposure toward land parcels held by the bank stands at INR22.1b, on

which it has made a provision of INR6.03b with the remaining unamortized

provisions being debited from the reserves and surplus.

Total number of fraud reported during the year stood at 145, with the amount

involved being INR5.29b. The bank has made a provision of INR1.7b during the

year, taking total provisioning to INR5.29b from INR3.54b in FY18. In addition to

this, there were 22 cases worth INR5.40b reported as fraud, and subsequently,

written off in the year.

25 June 2019

Axis Bank



The RBI imposed a penalty of INR20m in FY19 for non-compliance of the

guidelines related to ‘Collection of Account Payee Cheques – Prohibition on

Crediting proceeds to Third Party Account’ and Master Directions on ‘Frauds-

Classification and Reporting by commercial banks and select FIs’.

Average increase in remuneration of employees stood at 9.6% (increase in

median remuneration was 10.7%). For managerial personnel, the remuneration

increase stood at 7%.

Key management team

AXSB witnessed some major changes in key personnel and management team over

the recent past with Mr. Amitabh Chaudhry joining as the new CEO of the bank. Mr.

Rakesh Makhija has been appointed as the new chairman of the bank and will

assume office in the month of July’19 in place of Sanjiv Mishra who is set to retire.

Further, the bank has witnessed multiple changes in its top management team

(including shuffling of existing roles and responsibilities) – the detail of which has

been provided in the table below.

Exhibit 55: Key management team – major changes happened over the recent past

Chairman

MD & CEO

Deputy MD

Executive Director - Wholesale banking

Executive Director - Corporate Centre

Group Executive & CFO

Group Executive - Wholesale banking

Group Executive - Retail banking

Group Executive & Chief Credit Officer

President - Branch Banking

President - International Banking

President & Chief Compliance Officer

President & Chief Risk Officer

Head – Retail lending

Head – Cards and Payments

Company Secretary

Sanjiv Mishra

Shikha Sharma

V Srinivasan

Rajesh Dahiya

Jairam Sridharan

Sidharth Rath

Sanjay Silas

Rajendra Adsul

Rudrapriyo Ray**

Cyril Anand

Jagdeep Mallareddy

Sanjeev Moghe

Girish V Koliyote

Current

Rakesh Makhija***

Amitabh Chaudhry

Rajiv Anand*

Rajesh Dahiya

Jairam Sridharan

Ganesh Sankaran

Pralay Mondal

Deepak Maheshwari

Ravi Narayan

Sanjay Silas

Rudrapriyo Ray

Cyril Anand

Jagdeep Mallareddy

Sanjeev Moghe

Girish V Koliyote

*He was handling retail banking in earlier role

**He was president structured finance in earlier role

**To hold position from July 2019Source: MOFSL, Company

Valuation and view



We expect loan growth to revert back to healthy levels as tier 1 capitalization at

~12.5% and warrant conversion should provide enough capital for growth. The

bank has made significant investments to ride the next growth cycle (post asset

quality challenges) with expanding liability franchise (4,050 branches).

AXSB has been aiming for sustained improvement in its earnings profile under

the new management and has delivered a steady performance during FY19 with

sharp improvement in coverage ratio. The NPL cycle has shown improvement

signs and we estimate earnings to recover though credit cost trajectory can still

remain uneven given sluggish macro. We thus estimate RoA/RoE to improve to

1.4%/17.0% by FY21 and maintain our Buy rating with a TP of INR925 (2.7x

FY21E ABV

+ INR42 for subsidiaries).

25 June 2019

Axis Bank

Exhibit 56: SOTP-based valuation

Name

Axis Bank

Axis Finance

Axis Capital

Axis Securities

Axis Mutual Fund

Total Value of Subs

Less: 20% holding disc

Value of Subs (Post Holding Disc)

Target Price

Stake

100

Total Value

(INR)

22,70,582

55,660

20,134

21,864

36,523

1,34,181

26,836

1,07,344

23,77,927

Value

per Share

883

925

% of

total value

95.5

2.3

0.8

0.9

1.5

5.6

1.1

4.5

Rationale

2.7x P/ABV FY21E

3.0x Net worth FY21E

20x PAT FY21E

4% AUM FY21E

Source: MOFSL, Company

Exhibit 57: DuPont : Return ratios to improve from FY20

Y/E MARCH

Interest Income

Interest Expense

Net Interest Income

Fee income

Trading and others

Non-Interest income

Total Income

Operating Expenses

Employee cost

Others

Operating Profit

Core Operating Profit

Provisions

NPA

Others

PBT

Tax

RoA

Leverage (x)

RoE

FY15

8.40

5.03

3.37

1.60

0.38

1.98

5.35

2.18

0.74

1.44

3.17

2.79

0.55

0.50

0.05

2.62

0.88

1.74

10.2

17.8

FY16

8.18

4.82

3.36

1.50

0.37

1.87

5.23

2.02

0.67

1.34

3.22

2.84

0.74

0.82

-0.08

2.47

0.83

1.64

10.4

17.1

FY17

7.81

4.63

3.17

1.38

0.67

2.05

5.22

2.14

0.68

1.46

3.08

2.41

2.12

1.96

0.16

0.96

0.31

0.64

10.8

6.9

FY18

7.08

4.20

2.88

1.49

0.21

1.70

4.58

2.16

0.67

1.50

2.41

2.21

2.39

2.57

-0.17

0.02

-0.02

0.04

10.8

0.5

FY19

7.37

4.46

2.91

1.66

0.10

1.76

4.67

2.12

0.64

1.49

2.55

2.45

1.61

1.37

0.24

0.93

0.31

0.63

11.5

7.2

FY20E

FY21E

7.37

7.32

4.48

4.42

2.89

2.90

1.72

1.79

0.08

0.07

1.80

1.86

4.69

4.76

2.03

1.95

0.59

0.55

1.43

1.40

2.67

2.81

2.59

2.74

0.88

0.67

0.74

0.53

0.14

1.79

2.14

0.59

0.71

1.20

1.43

11.9

14.3

17.0

Source: MOFSL, Company

25 June 2019

Axis Bank

Exhibit 58: Valuation summary

Val

summary

Rating

FY21E

Mkt.

Cap

(INRb)

2,770

6,582

1,962

2,805

259

877

204

202

264

3,153

354

151

314

200

124

882

539

CMP

(INR)

Upside

(%)

-2

154

ABV (INR)

RoA (%)

RoE (%)

P/E (x)

P/ABV (x)

FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E

153

594

269

229

114

527

106

138

237

214

141

259

121

303

110

175

176

684

323

261

137

636

124

163

262

252

103

166

348

159

346

130

202

1.3

1.9

1.2

1.8

0.8

2.0

0.9

1.1

0.4

1.7

1.4

1.3

0.7

0.3

0.2

0.4

0.3

0.4

1.5

1.9

1.4

1.8

1.0

2.1

1.0

1.2

0.5

1.6

1.5

1.3

0.7

0.5

0.6

0.7

0.5

0.6

12.4

16.1

14.3

13.4

11.0

19.5

11.4

14.1

7.4

12.0

14.8

12.4

13.4

5.7

2.4

6.0

8.2

5.5

6.7

20.6

16.0

15.0

17.2

17.0

14.4

13.5

20.4

12.9

16.2

9.6

14.2

16.4

13.5

13.2

8.1

8.7

10.7

8.9

9.9

10.2

18.2

15.7

15.4

25.7

19.5

25.5

7.8

15.0

13.1

17.2

6.0

13.0

38.4

24.7

8.2

13.5

27.4

10.4

6.5

5.9

10.9

61.3

45.1

11.1

21.0

14.0

19.8

5.6

11.8

10.4

12.9

4.4

9.9

28.2

17.9

7.3

8.9

7.4

5.5

5.6

3.1

6.6

49.8

38.2

2.1

4.1

2.9

5.0

1.0

2.8

1.6

2.3

0.6

1.6

5.0

2.6

1.3

1.0

0.9

1.1

0.6

0.9

4.0

2.1

1.8

3.6

2.4

4.1

0.8

2.3

1.4

1.9

0.5

1.4

4.3

2.4

1.1

0.8

0.7

0.8

0.5

0.8

3.4

1.8

Private Banks

ICICIBC*

Buy

HDFCB

Buy

AXSB

Buy

KMB*

Neutral

YES

Buy

IIB

Buy

DCBB

Buy

SIB

Buy

EQUITAS

Buy

AUBANK

Buy

RBK

Buy

PSU Banks

SBIN*

Buy

PNB

Neutral

BOI

Neutral

BOB

Buy

CBK

Neutral

UNBK

Neutral

INBK

Buy

Life Insurance

HDFCLIFE** Buy

IPRULIFE** Buy

434

470

2,429 2,780

782

925

1,484 1,450

110

280

1,450 1,900

104

120

240

275

120

160

698

720

623

800

357

120

274

263

438

372

380

150

278

280

475

450

* Multiples adj. for value of key ventures/Investments; For ICICIBC, SBIN and KMB ABV is adjusted for investment in subsidiaries

**BV represents EV, RoE represents ROEV and P/BV represents P/EV Source: MOFSL, Company

25 June 2019

Axis Bank

Financials and Valuations

Income Statement

Y/E March

Interest Income

Interest Expense

Net Interest Income

Growth (%)

Non-Interest Income

Total Income

Growth (%)

Operating Expenses

Pre Provision Profits

Growth (%)

Core PPP

Growth (%)

Provisions (excl. tax)

PBT

Tax

Tax Rate (%)

PAT

Growth (%)

FY15

354.8

212.5

142.2

19.0

83.7

225.9

16.7

92.0

133.9

16.8

122.2

11.7

23.3

110.6

37.0

33.5

73.6

18.3

FY16

409.9

241.6

168.3

18.3

93.7

262.0

16.0

101.0

161.0

20.3

149.2

22.1

37.1

123.9

41.7

33.6

82.2

11.8

FY17

445.4

264.5

180.9

7.5

116.9

297.8

13.7

122.0

175.8

9.2

142.3

(4.7)

121.2

54.7

17.9

32.7

36.8

(55.3)

FY18

457.8

271.6

186.2

2.9

109.7

295.8

(0.7)

139.9

155.9

(11.3)

142.7

0.3

154.7

1.2

(1.5)

(126.8)

2.8

(92.5)

FY19

549.9

332.8

217.1

16.6

131.3

348.4

17.8

158.3

190.1

21.9

182.5

27.9

120.3

69.7

23.0

32.9

46.8

FY20E

639.4

388.6

250.8

15.5

156.3

407.1

16.8

175.6

231.4

21.8

224.2

22.9

76.5

154.9

51.1

33.0

103.8

121.9

(INRb)

FY21E

744.5

449.2

295.3

17.7

189.1

484.4

19.0

198.7

285.7

23.4

278.8

24.3

68.3

217.4

71.7

33.0

145.7

40.4

Balance Sheet

Y/E March

Equity Share Capital

Reserves & Surplus

Net Worth

Deposits

Growth (%)

of which CASA Dep.

Growth (%)

Borrowings

Other Liabilities & Prov.

Total Liabilities

Current Assets

Investments

Growth (%)

Loans

Growth (%)

Fixed Assets

Other Assets

Total Assets

FY15

4.7

442.0

446.8

3,224.4

14.8

1,444.0

14.2

797.6

150.6

4,619.3

361.0

1,175.5

3.5

2,810.8

22.2

25.1

246.9

4,619.3

FY15

41.1

13.2

1.4

0.5

1.2

0.7

68.0

FY16

4.8

512.8

517.6

3,579.7

11.0

1,694.5

17.3

1,085.8

215.1

5,398.2

333.3

1,315.2

11.9

3,387.7

20.5

35.2

326.7

5,398.2

FY16

60.9

25.2

1.8

0.7

2.6

1.2

58.6

FY17

4.8

538.8

543.6

4,143.8

15.8

2,130.5

25.7

1,050.3

277.0

6,014.7

502.6

1,287.9

-2.1

3,730.7

10.1

37.5

456.0

6,014.7

FY17

212.8

86.3

5.5

2.3

6.4

3.1

59.5

FY18

5.1

629.3

634.5

4,536.2

9.5

2,438.5

14.5

1,480.2

262.5

6,913.3

434.5

1,538.8

19.5

4,396.5

17.8

39.7

503.8

6,913.3

FY18

342.5

165.9

7.8

3.8

8.2

4.1

51.6

FY19

5.1

661.6

666.8

5,484.7

20.9

2,433.9

-0.2

1,527.8

330.7

8,010.0

672.0

1,749.7

13.7

4,948.0

12.5

40.4

599.9

8,010.0

FY19

297.9

112.8

6.0

2.3

3.0

2.2

62.1

FY20E

5.2

782.5

787.7

6,581.7

20.0

2,935.4

20.6

1,565.6

396.9

9,331.9

733.3

2,064.6

18.0

5,764.4

16.5

43.6

726.0

9,331.9

FY20E

256.6

84.4

4.45

1.46

2.4

1.2

67.1

FY21E

5.2

919.1

924.4

7,963.8

21.0

3,591.7

22.4

1,629.4

484.2

11,001.7

863.4

2,436.3

18.0

6,871.2

19.2

48.0

783.0

11,001.7

FY21E

236.7

74.8

3.45

1.09

2.0

0.9

68.4

Asset Quality

GNPA

NNPA

GNPA Ratio

NNPA Ratio

Slippage Ratio

Credit Cost

PCR (Excl. Tech. write off)

Source: Company, MOFSL

25 June 2019

Axis Bank

Financials and Valuations

Ratios

Y/E March

Yield and Cost Ratios (%)

Avg. Yield-Earning Assets

Avg. Yield on loans

Avg. Yield on Investments

Avg. Cost-Int. Bear. Liab.

Avg. Cost of Deposits

Avg. Cost of Borrowings

Interest Spread

Net Interest Margin

Capitalisation Ratios (%)

CAR

Tier I

Tier II

Business and Efficiency Ratios (%)

Loans/Deposit Ratio

CASA Ratio

Cost/Avg. Assets

Cost/Total Income

Cost/Core Income

Int. Expense/Int. Income

Fee Income/Total Income

Non Int. Inc./Total Income

Investment/Deposit Ratio

FY15

9.2

10.1

7.3

5.8

5.7

6.3

3.4

3.7

FY16

9.1

9.7

7.5

5.6

5.4

6.3

3.6

3.8

FY17

8.9

9.3

7.4

5.4

5.1

6.7

3.5

3.6

FY18

7.7

8.4

7.2

4.8

4.4

6.3

2.9

3.1

FY19

8.0

8.8

7.0

5.1

4.7

6.4

2.9

3.2

FY20E

8.0

9.2

7.2

5.1

4.8

6.4

2.9

3.2

FY21E

7.9

9.1

7.1

5.1

4.8

6.4

2.9

3.2

15.1

12.1

3.0

15.3

12.5

2.8

15.0

11.9

3.1

16.6

13.0

3.5

15.9

12.7

3.2

15.1

12.4

2.7

14.4

12.1

2.2

87.2

44.8

2.2

40.7

42.9

59.9

30.0

37.0

36.5

94.6

47.3

2.0

38.5

40.1

58.9

27.0

35.8

36.7

90.0

51.4

2.1

41.0

45.8

59.4

25.0

39.3

31.1

96.9

53.8

2.2

47.3

49.5

59.3

27.8

37.1

33.9

90.2

44.4

2.1

45.4

46.5

60.5

31.2

37.7

31.9

87.6

44.6

2.0

43.1

43.9

60.8

31.0

38.4

31.4

86.3

45.1

2.0

41.0

41.6

60.3

32.0

39.0

30.6

Profitability Ratios and Valuation

RoE

RoA

RoRWA

Book Value (INR)

Growth (%)

Price-BV (x)

Adjusted BV (INR)

Price-ABV (x)

EPS (INR)

Growth (%)

Price-Earnings (x)

Dividend Per Share (INR)

Dividend Yield (%)

17.8

1.7

2.1

188.5

15.8

4.1

180.6

4.3

31.2

17.6

25.1

4.6

0.6

16.8

1.7

2.0

223.1

18.4

3.5

211.2

3.7

34.6

11.0

22.6

5.0

0.6

6.8

0.7

0.8

232.8

4.4

3.4

200.6

3.9

15.4

-55.5

50.8

5.0

0.6

0.5

0.0

0.1

247.2

6.2

3.2

193.8

4.0

1.1

-92.8

5.5

0.7

7.2

0.6

0.8

259.3

4.9

3.0

219.7

3.6

18.2

42.9

0.0

14.3

17.0

1.2

1.4

1.5

1.8

301.0

353.2

16.1

17.3

2.6

2.2

269.2

323.5

2.9

2.4

40.0

55.7

119.8

39.1

19.5

14.0

2.3

3.5

0.3

0.4

Source: Company, MOFSL

25 June 2019

Axis Bank

NOTES

25 June 2019

Axis Bank

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are

available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a

registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National

Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance

Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of associate entities of Motilal Oswal Financial Services Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report

should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific

merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the

website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated

from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any

brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is

intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as

"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which

this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration

provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange

Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-

dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and

Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the

SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOSL has not received any compensation or other benefits from third party in connection with the research report

10 MOSL has not engaged in market making activity for the subject company

25 June 2019

Axis Bank

********************************************************************************************************************************

The associates of MOFSL may have:

- financial interest in the subject company

- actual/beneficial ownership of 1% or more securities in the subject company

- received compensation/other benefits from the subject company in the past 12 months

- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

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.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in

nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing

in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views

expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in

all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost

revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its

affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such

misuse and further agrees to hold MOFSL 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.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance

Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

25 June 2019