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Axis Bank Acquires Enam Securities: Post-Merger Integration Key to Success*

ET Cases, 8 Pages
AUTHOR(S) : Amit Tripathy, Doctoral Student, Dr. N. M. Leepsa, Assistant Professor - School of Management, National Institute of Technology Rourkela

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Axis Bank Acquires Enam Securities: Post-Merger Integration Key to Success

On October 20th 2012, Axis Bank bought Enam Securities for $44 million (INR2067 crore) in an all-stock deal. Shikha Sharma, CEO of Axis Bank received key businesses of Enam Securities such as investment banking, institutional and retail broking and distribution of financial products. In return, shareholders of Enam owned 3.3% equity shares of Axis Bank with a swap ratio of 5.7:1 (every share of Enam exchanged with 5.7 shares of Axis Bank). The deal was announced in November 2010, but in the process of obtaining regulatory approvals, Axis Bank fell amidst the legal controversies. India’s Central Bank denied Axis Bank’s plan of acquiring the investment banking business of Enam Securities on the grounds of tax liability. Nearly after ten months of legal struggle, Axis Bank was able to get RBI’s (Reserve Bank of India) approval with a revised plan.

Industry Analysis

The Indian banking framework comprises of a plethora of different types of banks. It has public sector banks, private sector banks, foreign banks, regional rural banks, urban cooperative banks and rural cooperative banks, in addition to cooperative credit institutions. As far as the numbers are concerned, Indian banking system has a list of 26 public, 25 private, 43 foreign, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative banks. As indicated in a report by KPMG-CII4, Indian banking industry is all set to become fifth biggest banking industry in the world by 2020.5 The report also states that by 2025, it may emerge as the third largest banking industry..............

Mergers & Acquisitions in Banking Sector

Mergers in Indian banking sector dates back to 1960s where a large-scale merger took place under the direction of RBI6, and as a result, the count of banks came down from 566 in 1951 to 85 by 1969. Public sector banks have failed to create inorganic growth and rather pushed their internal operations to improve efficiency and growth. On the other hand, private sector banks have been successful in expansion through mergers and acquisitions..........

Motives for M&A

The primary reasons behind M&As in the banking industry are listed below:

• Growth – Organic or internal growth are time-consuming, and active firms prefer acquisitions over them. M&As facilitate easier geographical extension as well as faster growth in size.

• Synergy – One of the necessary drivers for mergers is operational and financial synergy. In the banking sector, both revenue enrichment and cost saving serve as principal synergy elements.

• Managerial efficiency – Often, acquiring firm’s management team better handles the resources of the target business post-acquisition.

• ..........................

Axis Bank: Company Background

Axis Bank is the third leading private sector bank in India (Exhibit IV). The bank deals with the whole range of fiscal services to client sections covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses. The Bank has a vast track of 2,904 domestic branches and a spread of 12,743 ATMs across the country..........

Enam Securities: Company Background

Enam Securities Pvt. Ltd. provides underwriting services in India. Manek Bhanshali, Vallabh Bhanshali, Jagdish Master, and Nemish Shah put forth the foundation stone of the company. It also offers investment banking, corporate advisory, equity broking, insurance broking, mutual fund advisory, debt, and capital market services..........

The Deal between Axis Bank & Enam Securities

On November 17th 2010, Axis Bank announced that it would acquire the investment banking area of Enam Securities in an all-stock deal for around $455 million (INR2067 crore or INR20.67 billion). Shareholders of Enam would get 90% of the total compensation while rest 10% would be given to employees, but only after three years of their continuing in service. It was proposed that functional areas of Enam Securities such as investment banking, retail equities, institutional investments in equities, and distribution of financial products, NBFC (Non-Banking Financial Company) and the other related areas will be merged into an entirely owned subsidiary of Axis Bank..........

Issues During the Deal

While announcing the deal, Shikha Sharma (MD & CEO, Axis Bank) had said that they proposed the deal to be completed within 4-6 months. But despite efforts, the deal was finally completed on October 20th 2012. But, least they expected that the proposed deal would fall into the pits of regulatory frameworks and legal approvals. When the investors were awaiting the prior consent from the authorities of RBI, SEBI (Securities & Exchange Board of India) and the high courts of Mumbai and Gujarat, RBI was differently opined about the tax liability due to the change in the accounting scheme.................

Anticipated Synergies of the Axis-Enam Deal

According to Axis Bank, this deal would deliver certain synergies to its organization. These merits of the deal are:

• The planned merger would create one of the India’s driving financial services powerhouses consolidating the investment banking and equities franchise of Enam Securities with the predominant debt capital markets and commercial banking establishment of Axis Bank.

• ....................

Post-merger Integration

Successful mergers and acquisitions result when the organizations involved in the deal can integrate on people front. Same stands out to be in the case of Axis–Enam deal. Staff integration was the key to the success of the deal. Both the companies had an excellent strategic and cultural fit. As Shikha Sharma rightly said while announcing the deal, “We believe there are significant synergies, negligible overlaps and a strong cultural fit between the two organisations”. Both the firms were Indian banks and had a corporate culture much alike the other..............

Performance of Axis Bank

The performance of Axis Bank has been optimistic. The merger between Enam Securities has paid out as expected and the Cumulative Annual Growth Rate (CAGR) over the five years from 2011-12 to 2015-16 was 14% regarding total deposits, 17% regarding..........

Future Prospects

The Indian economy is on the cusp of a major growth curve. Dynamic business ideas, enhanced buyer certainty and more organized growth are probably going to boost up the nation’s economic growth. Greater expenditure on infrastructure, rapid implementation of projects and prolongation of changes are expected. Each of these variables demonstrates that Indian Banking segment is all set for progress because the credit needs of the growing business and economy will be fulfilled by the banking sector............

Assignment Questions

I. Do you support Axis Bank’s proposal to acquire Enam Securities? Why?

II. Which part of the deal was neglected by Axis Bank?

III. ...............


Exhibit I: Earning Estimates of the Banking Sector (% y-o-y growth)

Exhibit II: Earning Estimates of the Banking Sector (INR bn)

Exhibit III: Top Five Sectors in M&A Deals

Exhibit IV: Profile of Axis Bank

Exhibit V: Financial Ratios of Axis Bank

Teaching Note Preview

Axis Bank Acquires Enam Securities: Post-Merger Integration Key to Success


The case study of Axis Bank acquires Enam Securities focuses on the consolidation strategy adopted by Axis Bank. It introduces the class to the possible reasons behind mergers and acquisitions in the banking industry. This may not the first acquisition deal for Axis Bank but certainly is one of its kind as it marks as a congeneric merger between Axis Bank (from banking sector) and Enam securities (from securities investment sector). This case proposes an example where two firms with similar
working cultures collaborated and this marked as the key to the success that followed the merger. Competition in the banking sector has been intense since the inception of private banks in the country. Realising the challenges ahead and with intent of diversification of business, Axis Bank went on with this acquisition to enter the investment banking and equity broking business to grab a chunk of the market share in the industry.

Prerequisite Conceptual Understandings (PCUs)/Before the Classroom Discussion

The participants should be aware of the competitive strategies adopted by firms for expansion of business. They must have knowledge of the various types of mergers and acquisitions with the pros and cons of each category. They must have an understanding of how to construct SWOT matrix, and should be prepared with the SWOT analysis of Axis Bank. For a better analysis of the case, participants could be asked to visit the websites of Axis Bank to analyze how the firm is positioned in terms of customer satisfaction and reviews, user-friendliness, the range of services available, etc.

Case Positioning and Setting

This case study can be used in MBA Program/Executive MBA/BBA in the following courses and topics:

• Corporate Restructuring Course- Mergers & Acquisitions
• Strategic Management Course- Expansion Strategy, Mergers & Acquisitions, SWOT analysis, Business Models, Competitive Strategy

Assignment Questions

I. Do you support Axis Bank’s proposal to acquire Enam Securities? Why?

Preamble to the Case Study Analysis and Suggested Orchestration

This case study helps to have an insight on the present market scenario of banking segment in India. It helps to analyze the current trend of growth through expansion and helps the participants to understand the nature of mergers and acquisitions. It also helps the participants to develop a competitive scenario of a company through SWOT analysis. The case study can be carried out as presented in Exhibit TN-I..........

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Product code: BFS-1-0016, BFS-1-0016A


Award Winning Case Study

*ET CASES – VGSOM’S CASE AWARD FOR BEST CASE IN CORPORATE FINANCE at International Conference on Financial Markets and Corporate Finance (ICFMCF 2017), 7th & 8th July 2017, VGSOM, IIT Kharagpur

This case study on the deal between Axis Bank (a private sector bank) and Enam Securities (a division of an investment bank) enables the participants/readers of the case to understand the importance of post-merger staff integration as a key for success/failure of the deal. This deal is unique in its own way as it was marked as a congeneric merger between banking giant and an investment banker. Every company has its own set of code of conduct and hence will have a different organizational culture. These terms are sometimes overlooked during the deal structuring process, which later on proves to be fatal and leads to the downfall of business. Neglecting this core issue sometimes leads to loss of the common objective that persuaded the deal in the first place. The reasons are quite obvious as the merger of two firms with completely different working environments will result in resistance to change if the employees of the target firm are forced to adopt the working culture of the acquiring company. Contrary to it, this case proposes an example where two firms with similar working cultures collaborated and this marked as the key to the success of the merger.

Pedagogical Objectives

  • To understand and analyze the current business dynamics of the banking industry in India
  • To study the impact of regulatory approvals on the deal process
  • To examine Axis Bank’s competitive strategy through SWOT analysis
  • To inspect, how post-merger integration can be a driving force behind success of any merger deal

Case Positioning and Setting

This case study can be used in MBA Program/Executive MBA/BBA in the following courses and topics:

  • Corporate Restructuring Course – Mergers & Acquisitions
  • Strategic Management Course – Expansion Strategy, Mergers & Acquisitions, SWOT analysis, Business Models, Competitive Strategy

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