We want to become an MNC bank, the name change will enhance image
by : 6 Aug, 2007, 0516 hrs IST,Preeti R Iyer & Sangita Mehta, TNN
One of the few banks to have gone in for a brand makeover, UTI Bank has now assumed a new name, Axis Bank. PJ Nayak, the chairman and CEO of Axis Bank, seems to be quite clear about the way forward, the change in identity, the positioning of the bank, the pros and cons of pursuing organic growth, etc.Why did the bank decide to change its brand name?
We are doing this partly because there are shareholder-unrelated entities that carry the UTI brand, which was becoming increasingly untenable... If there are no shareholder relations between the two organisations, how can they actually share a common name?
When UTI was split into two vehicles, the brand was given to UTI Mutual Fund and others were permitted to use the brand only till January 2008. When it became clear to us that it was no longer tenable, we decided to have a brand of our own. The name Axis was chosen as it means a line of reference, around which everything is measured.
My feeling is that with time, people will think of us as Axis Bank. The test is whether in the next six months people would forget our old name. Otherwise, nothing really changes in the bank. We raised capital worth Rs 4,500 crore, which would help Axis Bank start off on a strong footing. We feel that this capital would last at least for three years in the case of pure organic growth.Would it have been very tempting for you to stay on the existing brand by paying a higher royalty, given the cost and time involved in this exercise?
In recent years, we have contributed more than our fair share on restoration of the UTI brand. But when it was clear to us that there was no other option, we decided to bite the bullet. We decided to assume our very own identity. The UTI identity came to us from the undivided Unit Trust of India (UTI). The split of UTI was the starting point for what was eventually a search for a new identity.The UTI brand had a quasi-government sovereign ring to it, especially when you go outside metros. That would have been an advantage, would you lose it now?
Our customer base is very different from the customer base of a mutual fund. So we were never really able to ride on the brand. The pace at which our customer base has grown indicates the level of customer service we provide. Also, the UTI brand was seen as a public sector brand. We are a board-managed private sector entity. By changing the name, we could reinforce this image.Where do you position Axis Bank from the business point of view?
We have taken the first step towards seeing ourselves as becoming an MNC bank from India. We have presence in four overseas locations ? Singapore, Hong Kong, China and Dubai. This is part of a journey to become a pan-Asian bank and then, eventually, a bank that is more multinational. We are foraying into smaller towns and entering district headquarters in a big way. In the next thirty months, we want to be present in 450 district headquarters. We have received licences to open 150 branches and 500 ATMs. We plan to open 125 branches by July 2008, half of which would be in large cities.
We are also setting up a large agri financing business, for which we need to be close to farmers, hence we are opening branches in villages. Besides, the bank has set up priority banking branches for customers with deposits of over Rs 5 lakh. It is one of the most fastest growing customer base of our bank, growing at 4% each year. We have three such specialised branches now, and plan to have one each in all the major metros. When you look at private sector peers, there are missing links, since most of them have a mutual fund and insurance business?
Commercial banking is something we have tried to focus on since our inception. As the first step towards diversion, we have set up an AMC to manage a private equity venture.
We would be in a position to launch the first tranche of the fund by end of September. The AMC will provide equity support for infrastructure projects. There are not many private equity funds here, focusing on infrastructure projects.The bank has often raised capital from the overseas market, rather than making an offering to the Indian public. Why is it so?
This is partly because wholesale offering always fetches a better price, and we also decided to cast the net wider than the Indian shores. The funds were raised through a combination of GDRs and QIPs. We also saw to it that we go for uniform pricing of shares, which has in turn protected the minority shareholders.Which are the other areas that the bank will branch out to, given that you have raised this much capital?
We are growing at 45-50% every year. If we grow purely organically, this capital will last for 3-4 years. But we are looking at other areas within the financial services domain. It may be premature to talk of these at this stage. Going forward, Axis Bank could also look at evolving into a group.Will the bank be looking at acquiring another bank, since you have adequate capital?
Within the banking space there are not many opportunities available. Many of the old private sector banks have a size of ?three months of our growth?. Also, there are issues relating to the integration of technology platforms and human resources. We have a clear business model, under which we see no value in a merger or an acquisition purely to acquire branches; we get licences easily from the central bank. May be, we could look at such options in the wider financial services space, beyond the mainstream banking sector.The central bank has told your bank to put a succession plan in place?
That is for the board of directors of the bank to decide. The board is well aware of what needs to be done. It would not be right for me to comment on this at the moment.