MUMBAI: The Reserve Bank of India has told private lender Axis Bank that the proposed acquisition of Enam's broking and investment banking businesses has to be an all-cash deal. The regulator's stand on the matter, which was spelt out to ETby a person familiar with the RBI's thinking, puts a question mark on the ambitious deal that was structured as an all-stock transaction. TheRs 2,067-crore deal, pending since last November, was jointly announced by Axis and Enam, an influential Dalal Street brokerage. Under the original structure, submitted to the RBI a year ago, Axis had proposed it would issue stock to Enam's founders while a subsidiary of the bank would take over the businesses. But the central bank had turned down the proposal on the grounds the entity that would issue the shares was different from the one that would own the new businesses. Following this, Axis submitted a new proposal to salvage the deal. According to the revised plan, Axis would issue shares, acquire the businesses from Enam and "momentarily" hold the assets before transferring them to a subsidiary. But, this proposal, too, has not gone down well with the RBI, the person familiar with the regulator's thinking said. This is because it does not want such a deal to become a precedent for smaller banks trying to buy brokerages by offering stock to brokers. Enam officials declined comment while a spokesperson for Axis Bank said "there is no change in the deal structure and it continues to be an all-stock deal for which in-principle approval of RBI has been received". The Axis official also said "there is no truth in the speculation that the bank has been advised to carry out an all-cash transaction". Another senior bank official said the board was meeting on September 16 to consider a revised plan, and the revision did not envisage an all-cash deal. The RBI spokesperson did not respond to ET's email query.
ET
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