'Hopeful of RBI nod for Enam-Axis deal by March' | business | Hindustan Times
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'Hopeful of RBI nod for Enam-Axis deal by March'

business Updated: Feb 26, 2012 21:29 IST

Leading brokerage firm Enam Securities on Sunday said it is hopeful of its sale to Axis Bank — pending for the last 16 months -— going through before the end of the fiscal.

"We have the Reserve Bank's mandate for the sale. It is stuck in some procedural issues," said Vallabh Bhanshali, co-founder and chairman, Enam Securities on the sidelines of a function.

When asked whether the deal would materialise within this fiscal, he said, "I hope so."

On November 17, 2010, Bhanshali, a master deal-maker, struck a deal with India's third largest private lender Axis Bank to sell his brokerage and investment banking businesses for a whopping R2,067 crore in an all-stock deal, while retaining asset management and portfolio management businesses of Enam.

But the Reserve Bank of India (RBI) is reported to have asked the parties to rework the terms.

Because of some bad experiences, the Reserve Bank of India does not encourage banks to run stock broking as a department, it prefers the banks to open subsidiaries for that. The RBI's reported discomfort with the deal was about the fact that Axis's brokerage subsidiary Axis Securities and sales would buy Enam, but the bank would be paying for it with its own shares.

Under the initial proposal, the investment banking and equity capital markets businesses would be merged with a wholly-owned arm of the bank.

The all-stock deal sought to give 5.7 shares of Axis Bank in exchange for a share in the unlisted Enam. The deal also offered a board position for Bhanshali at Axis.

According to analysts, the deal would be a win-win for both as Enam's strong M&A team could bring in large deals on the Axis table, while the bank, with a strong balance sheet, could back such deals to earn good fee income, apart from using Enam's expertise in distributing public offers through its over 1,100 branches.