24 February 2020
Company Update | Sector: Financials
Axis Bank
Buy
BSE SENSEX
41,170
S&P CNX
12,081
CMP: INR744
TP: INR860 (+16%)
Enters into exclusive arrangement with Max Financial
Win-win for both; AXSB to further spruce up its SOTP story
Axis Bank (AXSB), Max Financial Services Limited (MAXF) and Max Life Insurance
have entered into an exclusive arrangement to explore a long-term strategic
partnership, subject to all regulatory approvals.
Axis Bank and Max Life already have a successful bancassurance (banca)
arrangement for nearly a decade. AXSB has accounted for 55%-60% of total
individual APE for Max Life over the past several years. This has enabled Max Life to
emerge as a leading life insurance company in a space dominated by insurers
promoted either by banks or NBFCs.
AXSB has been looking to enter the life insurance business as a manufacturer for
Financials & Valuation (INR b)
some time and consummation of this deal will boost symbiotic relationship between
FY19 FY20E FY21E FY22E
Y/E MARCH
the two entities. AXSB’s MD & CEO – Mr Amitabh Chaudhry – has a long and proven
217.1 247.4 291.7 346.8
NII
track record in building insurance business and his experience will come useful in
190.1 228.4 271.6 327.0
OP
scaling up the insurance franchise.
46.8 48.8 121.9 174.5
NP
3.2
3.2
3.3
3.4
While the deal contours are yet to be finalized, the long term tie-up with AXSB as a
NIM (%)
banca partner will remove an important overhang on MAXF and help it close the
18.2 18.1 43.3 62.0
EPS (INR)
valuation gap with peers. AXSB will also benefit as it gets a large stake in a strong
EPS Gr. (%) 1,538.1 -0.6 139.2 43.1
insurance franchise and benefits from the potential business rerating.
259.3 304.5 344.4 402.3
BV/Sh. (INR)
ABV/Sh. (INR) 219.7 264.5 306.0 364.6
MAXF is already a strong insurance franchise but trading at a meaningful discount to
peers. The clarity on distribution and promoter shareholding can help rerate the
Ratios
stock significantly. AXSB, on the other hand, will look to strengthen its subs profile
7.2
6.4 13.3 16.6
RoE (%)
with a stake in the life insurance venture. While overall value creation for AXSB is
0.6
0.6
1.3
1.6
RoA (%)
contingent on the performance of core bank, the SOTP story is evolving well as it can
0.0 12.7
8.0
6.5
Payout (%)
potentially contribute 8%-10% of total valuation. Maintain Buy with a TP of INR860.
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
2,820
2098.3 / 29.3
827 / 623
4/0/-9
7232
84.3
Valuations
P/E (X)
P/BV (X)
P/ABV (X)
Div. Yield (%)
38.2
2.7
3.2
0.0
38.4
2.3
2.6
0.3
16.1
2.0
2.3
0.5
11.2
1.7
1.9
0.5
A step toward venturing into life insurance – as close as it gets!
AXSB has been looking to enter the life insurance business as a manufacturer for
some time and consummation of this deal will allow it to expand its footprint into
life insurance wherein it will own a significant stake v/s 2% currently. This will
boost symbiotic relationship between the two entities. AXSB’s MD & CEO – Mr
Amitabh Chaudhry – has a long and proven track record in running life insurance
business as he successfully headed HDFCLIFE for almost a decade. We believe that
the strategic partnership, AXSB’s vast distribution potential and management
capability will come useful in further scaling up the insurance franchise.
Shareholding pattern (%)
As On
Dec-19 Sep-19
Promoter
15.7
16.2
DII
22.6
22.2
FII
49.6
49.3
Others
12.2
12.2
FII Includes depository receipts
Stock Performance (1-year)
Dec-18
23.1
19.0
48.7
9.3
AXSB accounts for 55%-60% of individual APE for Max Life; life insurance
contributes ~7% of total fees (lower than other private peers)
AXSB and Max Life have a successful banca arrangement for nearly a decade with
the former accounting for 55%-60% of total individual APE for Max Life over past
several years. This has enabled Max Life to emerge as a leading life insurance
company in a space completely dominated by insurers promoted by banks/NBFCs.
For AXSB, sale of life insurance forms 52.7% of total banca income. This
corresponds to 7.2% of total fee and 3.4% of operating profits and stands slightly
lower than other major banks which have fee income from sale of life insurance in
the range of 10%-11%. This deal thus bodes well in further increasing the fee
income profile for AXSB, supporting profitability.
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@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.
 Motilal Oswal Financial Services
Axis Bank
Max Life reported 20% YoY growth in total APE; NBM stands at 21%
Max Life insurance is the largest non-bank private life insurer and the fourth largest
private life insurance company with a total/private market share of 5.1%/9.7% as on
FY20YTD based on individual WRP. During 9MFY20, Max Life reported a 14% YoY
increase in its GWP, led by first year premium growth of 19% YoY to INR36.9b, while
renewal premium grew 11% YoY to INR66.2b. Total APE grew 20% YoY to INR27.4b
with individual APE at INR27.2b over the similar period. The company has one of the
most diversified new business mix, with the share of PAR/Non-PAR/ULIP at
30%/20%/37%. The company has reported VNB growth of 24% YoY during 9MFY20
with NBM at 21% (24.3% pre cost overrun). During 9MFY20, EV has grown at 22%
YoY to INR100.8b with an operating RoEV of 18.4%.
Successful closure will remove key overhang for MAXF and aid valuation re-
rating
This deal will remove an important overhang on the stock performance of Max
Financial Services as AXSB – which has contributed significantly toward the overall
business – will continue as a banca partner. New premium generated with AXSB has
aggregated ~INR120b over the past decade, while maintaining high persistency.
Stock of MAXF has been constantly under pressure and trading at a valuation of
Sep’21E P/EV of 1.4x which is lower in comparison to peers (35%-64% discount,
please refer exhibit 7) despite the company having very strong operating metrics
and one of the most diversified business mix. We thus believe that this deal would
enable significant re-rating for MAXF and would reflect in the SOTP valuation for
AXSB.
AXSB’s SOTP story to spruce up further; subs contribution will increase to
~10%
We value AXSB on an SOTP basis wherein the contribution of its subsidiaries stands
much lower at ~5% in comparison to 24%-32% for major peers like ICICIBC, SBIN and
KMB (please refer exhibit 8). We note that SBIN, ICICIBC and HDFC have successfully
scaled up their various subsidiaries, resulting in significant wealth creation – an
aspect which has been lacking with AXSB. According to media articles, AXSB could
invest for ~20% stake in MAXF which could potentially increase its subs contribution
to 7.9%. Our scenario analysis suggests that the potential stake at 20%, 25% and
30% could increase the subs contribution for AXSB to 8%-10%.
Valuation and view
AXSB has been looking to the enter life insurance business as a manufacturer for
some time and consummation of this deal will boost symbiotic relationship between
the two entities. This deal will further remove an important overhang on the stock
performance of MAXF as it ensures AXSB will continue as a banca partner and thus
help MAXF close the valuation gap with its peers. AXSB, on the other hand, will
further strengthen its subs profile with a stake in the life insurance venture. While
overall value creation for AXSB is contingent on the performance of core bank, the
SOTP story is evolving well as it can potentially contribute 8%-10% of total valuation.
AXSB’s MD & CEO has a long and proven track record in building insurance business
which will be useful in scaling up the insurance franchise. We maintain Buy with a
target price of INR860 (2.4x Sep’21E ABV).
24 February 2020
2
 Motilal Oswal Financial Services
Axis Bank
Exhibit 1:
AXSB: Fees from sale of life insurance comprise ~53% of total bancassurance income; ~7% of fee income
INRm
Sale of Life insurance
sale of Non-Life insurance
Sale of MF
Others
Total Bancassurance income
Total Fee Income
PPoP
Life insurance fees as % of Banca income
Life insurance fees as % of fee income
Life insurance fees as % of PPoP
FY15
4,913
224
3,144
342
8,623
67,790
133,854
57.0%
7.2%
3.7%
FY16
4,919
234
3,114
571
8,838
67,076
161,036
55.7%
7.3%
3.1%
FY17
5,582
330
3,174
886
9,972
70,283
175,845
56.0%
7.9%
3.2%
FY18
5,395
564
3,885
885
10,728
77,299
155,945
50.3%
7.0%
3.5%
FY19
6,405
686
4,061
991
12,143
88,537
190,051
52.7%
7.2%
3.4%
Source: Company, MOFSL
AXSB’s fee income from
sale of life insurance at ~7%
of total fees stands lower
than 10%-11% for major
private peers.
Exhibit 2:
Comparison of fee income from sale of life insurance across major peers/banks
As on FY19 (INRm)
Sale of Life insurance
sale of Non-Life insurance
Sale of MF
Others
Total Bancassurance income
Total Fee Income
PPoP
Life insurance fees as % of Banca income
Life insurance fees as % of fee income
Life insurance fees as % of PPoP
AXSB
6,405
686
4,061
991
12,143
88,537
190,051
52.7%
7.2%
3.4%
ICICIBC
9,792
1,383
3,157
-
14,332
102,319
234,379
68.3%
9.6%
4.2%
HDFCB
14,734
2,227
5,040
-
22,000
138,055
397,497
67.0%
10.7%
3.7%
KMB
2,005
131
2,053
-
4,189
33,908
83,482
47.9%
5.9%
2.4%
SBIN
9,519
2,709
-
39
12,267
233,039
554,360
77.6%
4.1%
1.7%
Source: Company, MOFSL
Exhibit 3:
Max Life: AXSB’s contribution to premium mix
Individual APE (INR m)
From Axis Bank
From other Banca
Total Banca channel
% from AXSB
Total Individual APE
% from AXSB
FY16
12,490
1,790
14,280
87.5%
21,030
59.4%
FY17
15,640
3,180
18,820
83.1%
26,570
58.9%
FY18
19,360
3,990
23,350
82.9%
32,170
60.2%
FY19
22,620
4,980
27,600
82.0%
39,170
57.7%
Exhibit 4:
Channel mix across life insurers - 9MFY20
Proprietary
0%
55%
45%
6%
53%
41%
Banca
7%
66%
27%
Others
1%
67%
32%
Source: MOFSL, Company
Source: MOFSL, Company
Axis Bank holds ~2% of total
shareholding.
Exhibit 5:
Shareholding pattern of Max Life Insurance
Shareholding Pattern
Max Financial Services
Mitsui Sumitomo Insurance
Axis Bank
%
72.5%
25.5%
2.0%
Source: Company, MOFSL
24 February 2020
3
 Motilal Oswal Financial Services
Axis Bank
Exhibit 6:
Shareholding pattern of Max Financial Services
Shareholding Pattern
Promoter
DII
FII
Others
% of promoters shared held as pledge
%
28.3%
31.5%
27.7%
12.5%
71.5%
Source: Company, MOFSL
Promoters hold ~28% of the
total shares with a pledge
of ~71%
MAX Life is trading at a
significant discount to other
listed life insurers.
Exhibit 7:
Valuation comparison across major life insurers
Based on Sep'21
EV (INRb)
EV per share
CMP
P/EV
Discount at which Max is trading
HDFC Life
287.2
142.6
573.8
4.0
-64%
IPRU Life
320.2
223.1
495.0
2.2
-35%
SBI Life
340.1
340.1
928.0
2.7
-48%
Max Life
146.6
549.2
562
1.4
Source: Company, Bloomberg, MOFSL
AXSB’s subs contribute ~6%
to total SOTP, which is far
lower than 24%-31% for
other peers.
Exhibit 8:
Subs contribution in total SOTP across major peers/banks
Contribution by Subs
Subs Value
Total SOTP Value
% of contribution by Subs
% contribution by life insurers
AXSB
48
860
5.6%
NA
ICICIBC
153
650
23.5%
8.2%
HDFCB
106
1,500
7.1%
NA
KMB
494
1,625
30.4%
10.9%
SBIN
131
425
30.8%
12.6%
Source: Company, MOFSL
Exhibit 9:
Potential increase in stake for AXSB in Max life could increase the contribution of
subs to 8%-10%
Based on Sep’21
Proposed Stake
Valuation of Max Life
- at current multiples (1.4x)
- at proposed multiples (2.5x/2.7x/3.0x)
Value for AXSB
Per share value of AXSB
% contribution to total SOTP of AXSB
Proposed contribution of all subs to SOTP of AXSB (%)
Target Price under the scenarios
% increase from the base case (TP of INR860)
Case 1
20.0%
210,050
375,089
75,018
26.6
3.0
7.9
881
2.5%
Case 2
25.0%
210,050
405,097
101,274
35.9
4.1
8.7
889
3.4%
Case 3
30.0%
210,050
450,107
135,032
47.9
5.4
9.8
898
4.5%
Source: Company, MOFSL
Exhibit 10:
AXSB current SOTP based pricing
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
100
100
75
Total Value
(INR m)
2,289,516
62,265
22,651
24,378
60,402
169,696
33,939
135,756
2,425,272
Value per
Share
812
22
8
9
21
60
12
48
860
% of total
value
94.4
2.6
0.9
1.0
2.5
7.0
1.4
5.6
Rationale
2.4x P/ABV Sep21E
3.0x Net worth Sep21E
20x PAT Sep21E
20x PAT Sep21E
5% AUM Sep21E
Source: Company, MOFSL
24 February 2020
4
 Motilal Oswal Financial Services
Axis Bank
Exhibit 11:
Business performance of Max Life Insurance
Max Life (INRm)
Total APE
% Growth
Individual APE
% Growth
New Business Premium
% Growth
FY16
21,616
8.6%
21,018
7.9%
92,160
NA
FY17
27,495
27.2%
26,392
25.6%
107,800
17.0%
FY18
33,067
20.3%
32,145
21.8%
125,010
16.0%
FY19
40,010
21.0%
38,787
20.7%
145,750
16.6%
9MFY20
27,400
20.0%
27,180
20.0%
103,110
14.0%
Total APE grew 20% YoY for
9MFY20 while new business
premium increased 14%
YoY.
Source: Company, MOFSL
Max life has VNB margin of
21% as on 9MFY20 (post
overrun)
Exhibit 12:
Key operating metrics for major life insurers
Max Life
INRm
Renewal Premium
% Growth
VNB
% Growth
VNB Margin (Post overrun)
VNB Margin (Pre overrun)
EV
% Growth
Opex to GWP
Operating RoEV
RoE
Solvency Ratio
AUM (INRb)
Debt
Equity
Persistency
13th Month
25th Month
37th Month
49th Month
61st Month
83%
71%
64%
58%
53%
85%
72%
63%
60%
51%
90%
80%
73%
68%
55%
85%
76%
71%
66%
58%
86%
78%
71%
67%
59%
FY19
94,150
15.5%
8,560
30.0%
21.7%
22.5%
92,570
20.0%
13.2%
21.9%
21%
242%
630
78%
22%
9MFY20
66,180
11.0%
5,760
24.0%
21.0%
24.3%
100,770
22.0%
16.3%
18.4%
22%
220%
690
78%
22%
HDFC Life
99,423
11.5%
14,070
44.9%
26.6%
NA
208,410
19.8%
18.5%
19.0%
21.3%
195%
1,365
63%
37%
As on 9MFY20
IPRU Life*
145,080
4.7%
11,350
24.7%
21.0%
NA
216,230
15.1%
16.6%
20.2%
16.4%
207%
1,720
53%
47%
SBI Life*
159,104
31.0%
14,700
26.7%
18.3%
NA
224,020
17.5%
10.0%
17.4%
14.8%
230%
1,642
76%
24%
*EV and Operating RoEV are as on FY19. For IPRU Life, RoE is as on FY19
Source: Company, MOFSL
Protection APE for Max Life
forms 13% of total business
mix as on 9MFY20
Exhibit 13:
Max Life has one of the most diversified business mix amongst life insurers (%)
Business Mix (APE basis)
ULIP
PAR
Term
Non Par savings/Others
Channel mix
Proprietary
Banca/Others
Annuity
45
55
0
41
53
6
27
66
7
32
67
1
Source: Company, MOFSL
HDFC Life
28
13
7
52
IPRU Life
69
11
14
6
SBI Life
69
11
8
11
Max Life
37
30
13
20
24 February 2020
5
 Motilal Oswal Financial Services
Axis Bank
Annexures
Exhibit 14:
Total APE across major life insurers
Total APE (INRm)
HDFC Life
IPRU Life
SBI Life
Max Life
FY15
31,854
46,503
35,495
19,896
FY16
36,160
51,087
48,782
21,616
FY17
40,851
64,966
66,028
27,495
FY18
53,833
79,033
84,120
33,067
FY19
60,495
80,058
95,307
40,010
9MFY20
51,050
54,070
80,500
27,400
Source: Company, MOFSL
Exhibit 15:
Individual APE across major life insurers
Individual APE (INRm)
HDFC Life
IPRU Life
SBI Life
Max Life
FY15
29,675
45,956
31,203
19,483
FY16
33,330
49,678
42,760
21,018
FY17
36,356
64,081
59,380
26,392
FY18
47,536
74,606
77,873
32,145
FY19
50,123
70,946
89,547
38,787
9MFY20
43,940
49,550
74,100
27,180
Source: Company, MOFSL
Exhibit 16:
New Business Premium across major life insurers
New Business Premium (INRm)
HDFC Life
IPRU Life
SBI Life
Max Life
FY15
147,625
151,604
127,800
NA
FY16
161,788
189,987
156,655
92,160
FY17
192,749
221,553
208,525
107,800
FY18
233,710
268,107
251,601
125,010
FY19
289,240
305,783
328,904
145,750
9MFY20
217,591
224,038
284,610
103,110
Source: Company, MOFSL
Exhibit 17:
Surplus across major life insurers
Surplus (INRm)
HDFC Life
IPRU Life
SBI Life
Max Life
FY15
8,220
11,620
6,984
6,136
FY16
9,597
13,421
6,643
4,632
FY17
9,476
10,739
6,544
6,555
FY18
10,946
13,632
10,228
7,083
FY19
13,507
12,362
10,874
8,245
9MFY20
8,354
12,859
12,351
4,995
Source: Company, MOFSL
Exhibit 18:
PAT across major life insurers
PAT (INRm)
HDFC Life
IPRU Life
SBI Life
Max Life
FY15
7,855
16,344
8,200
4,142
FY16
8,183
16,505
8,610
4,391
FY17
8,921
16,815
9,547
6,598
FY18
11,090
16,191
11,502
5,276
FY19
12,768
11,389
13,268
5,564
9MFY20
9,836
8,893
8,915
3,082
Source: Company, MOFSL
24 February 2020
6
 Motilal Oswal Financial Services
Axis Bank
Exhibit 19:
Axis Bank: One-year forward P/B
P/B (x)
3.5
2.8
2.0
1.3
0.5
2.0
1.6
1.0
2.5
Avg (x)
Max (x)
Min (x)
+1SD
3.0
2.2
-1SD
Source: MOFSL, Company
Exhibit 20:
Axis Bank - DuPont Analysis: Return ratios to show a steady improvement led by moderation in credit cost
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
7.35
4.42
2.93
1.72
0.09
1.80
4.73
2.03
0.63
1.40
2.70
2.62
1.59
1.51
0.08
1.11
0.53
0.58
11.1
6.4
FY21E
7.36
4.30
3.06
1.77
0.07
1.84
4.90
2.05
0.62
1.42
2.85
2.78
1.14
1.07
0.07
1.71
0.43
1.28
10.4
13.3
FY22E
7.36
4.21
3.15
1.80
0.06
1.86
5.01
2.04
0.61
1.43
2.97
2.91
0.85
0.79
0.06
2.12
0.53
1.58
10.5
16.6
24 February 2020
7
 Motilal Oswal Financial Services
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)
NM
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
NM
FY20E
621.3
373.8
247.4
14.0
152.3
399.7
14.7
171.3
228.4
20.2
221.2
21.2
134.6
93.8
45.0
48.0
48.8
4.3
FY21E
702.0
410.3
291.7
17.9
175.2
466.9
16.8
195.2
271.6
18.9
264.8
19.7
108.7
163.0
41.1
25.2
121.9
150.1
FY22E
810.4
463.6
346.8
18.9
204.9
551.7
18.2
224.7
327.0
20.4
320.5
21.0
93.8
233.2
58.8
25.2
174.5
43.1
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
7.5
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
5.8
2.3
3.0
2.2
62.1
FY20E
5.6
851.8
857.5
6,225.1
13.5
2,602.1
6.9
1,416.5
396.9
8,896.0
703.0
1,767.2
1.0
5,714.9
15.5
41.6
669.3
8,896.0
FY20E
310.5
131.3
5.27
2.30
3.7
2.4
57.7
FY21E
5.6
964.0
969.7
7,283.4
17.0
3,204.7
23.2
1,439.2
476.3
10,168.6
741.4
1,943.9
10.0
6,686.5
17.0
43.7
753.1
10,168.6
FY22E
5.6
1,127.2
1,132.8
8,594.4
18.0
3,953.4
23.4
1,555.1
571.5
11,853.9
812.0
2,254.9
16.0
7,890.0
18.0
46.7
850.2
11,853.9
Asset Quality
GNPA
NNPA
GNPA Ratio
NNPA Ratio
Slippage Ratio
Credit Cost
PCR (Excl. Tech. write off)
FY21E
FY22E
307.1
304.7
125.5
121.4
4.47
3.77
1.88
1.54
2.7
2.2
1.7
1.20
59.1
60.2
Source: Company, MOFSL
24 February 2020
8
 Motilal Oswal Financial Services
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. Liability
Avg. Cost of Deposits
Avg. Cost of Borrowings
Interest Spread
Net Interest Margin
Capitalization 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
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
91.8
41.8
2.0
42.9
43.6
60.2
30.7
38.1
28.4
91.8
44.0
2.0
41.8
42.4
58.4
30.5
37.5
26.7
91.8
46.0
2.0
40.7
41.2
57.2
30.4
37.1
26.2
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
17.2
14.1
3.1
16.4
13.7
2.7
16.0
13.7
2.3
9.2
10.1
7.3
5.8
5.7
6.3
3.4
3.7
9.1
9.7
7.5
5.6
5.4
6.3
3.6
3.8
8.9
9.3
7.4
5.4
5.1
6.7
3.5
3.6
7.7
8.4
7.2
4.8
4.4
6.3
2.9
3.1
8.0
8.8
7.0
5.1
4.7
6.4
2.9
3.2
8.0
9.1
7.1
5.1
4.8
6.4
2.9
3.2
8.0
9.1
6.9
5.0
4.7
6.4
3.0
3.3
8.0
9.0
6.8
4.9
4.6
6.5
3.1
3.4
FY15
FY16
FY17
FY18
FY19
FY20E
FY21E
FY22E
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
3.7
180.6
3.9
31.2
17.6
22.3
4.6
0.6
16.8
1.7
2.0
223.1
18.4
3.1
211.2
3.3
34.6
11.0
20.1
5.0
0.7
6.8
0.7
0.8
232.8
4.4
3.0
200.6
3.5
15.4
-55.5
45.2
5.0
0.7
0.5
0.0
0.1
247.2
6.2
2.8
193.8
3.6
1.1
-92.8
NM
5.5
0.7
7.2
0.6
0.8
259.3
4.9
2.7
219.7
3.2
18.2
NM
38.2
0.0
0.0
6.4
0.6
0.8
304.5
17.5
2.3
264.5
2.6
18.1
-0.6
38.4
2.2
0.3
13.3
1.3
1.6
344.4
13.1
2.0
306.0
2.3
43.3
139.2
16.1
3.5
0.5
16.6
1.6
2.0
402.3
16.8
1.7
364.6
1.9
62.0
43.1
11.2
4.0
0.5
Source: Company, MOFSL
24 February 2020
9
 Motilal Oswal Financial Services
Axis Bank
NOTES
24 February 2020
10
 Motilal Oswal Financial Services
Axis Bank
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
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 MOFSL, 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 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, 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 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
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
24 February 2020
11
 Motilal Oswal Financial Services
Axis Bank
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.
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