Axis Bank gets into Acquisition Financing: A deep dive into Strategies, RBI Guidelines, and Market Implications

Axis Bank, one of the leading private sector banks in India, is preparing to be a major player in the country’s mergers and acquisitions (M&A) space. In the past, Indian banks were prohibited from executing acquisitions financed by shares, an area primarily led by foreign banks and non-banking financial companies (NBFCs). Recent regulatory changes by the Reserve Bank of India (RBI) are going to alter this.

RBI’s Evolving Regulatory Framework for M&A Financing

In October 2025, the Reserve Bank of India revised its Capital Market Exposures (CME) guidelines, allowing banks to fund corporate acquisitions, a departure from earlier restrictions that barred lending for share purchases. Lending limits against shares were raised from ₹20 lakh to ₹1 crore, and IPO financing caps per individual increased from ₹10 lakh to ₹25 lakh.

India’s M&A deals in FY24 were valued at over $120 billion (approx. ₹10 trillion). Assuming a debt component of 40% and that banks finance 30% of this debt, the potential credit expansion stands at ₹1.2 trillion.

Axis Bank’s Strategic Positioning in M&A Financing

Here is how Axis is positioning itself in M&A financing:

Disinvestment Strategy

To fund its acquisition ambitions, Axis is exploring a stake sale in its NBFC subsidiary, targeting a capital raise of ₹2,000–₹4,000 crore. This divestment aligns with RBI’s directive for banks to reduce exposure to entities in the same line of business. The proceeds are expected to be channelled into syndication and acquisition financing, enhancing liquidity buffers and enabling participation in large-ticket deals. Analysts view this move as a strategic capital reallocation, especially given the tightening of Basel III norms around capital adequacy.

Bond Syndication

Axis is positioning itself as a dominant player in bond and loan syndication, with annual volumes exceeding ₹1.5 trillion. This syndication capability allows it to structure hybrid acquisition financing—combining bank loans, bonds, and mezzanine instruments. The bank’s syndication desk is expected to play a pivotal role in underwriting deals, especially in sectors with complex capital structures. This strategy also enables risk-sharing across institutional investors, reducing concentration risk and enhancing deal scalability.

Impact of Revised M&A Financing Rules on the Market

Here is how the new M&A financing rule will impact the market:

Impact on Credit Spreads

The entry of banks into acquisition financing is expected to compress credit spreads in the AAA and AA segments by 15–25 basis points over the next two quarters. With banks offering competitive rates and longer tenors, corporates may shift away from private credit and NBFCs. This compression could alter pricing benchmarks across the debt market, especially for acquisition-linked issuances. However, spreads in the BBB segment may widen due to increased risk aversion and tighter underwriting norms.

Valuation Uplift

Acquisition financing by banks is likely to drive a valuation uplift of 8–12% in target sectors such as renewable energy, logistics, and fintech. With easier access to debt, acquirers can offer higher premiums, especially in competitive bidding scenarios. This uplift is also supported by improved deal certainty and faster execution timelines.

Conclusion

Axis Bank’s bold push into M&A financing, supported by the RBI’s relaxed CME norms, is set to energise acquisition-led deal activity across Indian equity markets. With easier access to debt, sectors such as fintech, logistics, and renewable energy could see valuations climb by 8–12%, fuelled by competitive bidding and stronger deal pipelines. The tightening of credit spreads in AAA and AA segments will further reduce borrowing costs, making debt-linked equities and bond issuances more attractive. However, this shift may come at the expense of NBFCs and private credit players, as investors gravitate toward bank-backed deals that offer scale and reliability.

As a trader, it is good to brace for sharp movements in acquisition-target stocks. However, institutional investors may increasingly channel funds into sectors benefiting from Axis Bank’s syndication and hybrid financing strategies.

Sources

The Economic Times
Mint
Financial Express