The Reserve Bank of India has approved Axis Bank's revised plan to acquire the broking and investment banking businesses of Enam Securities.
This ends nearly 10 months of uncertainty over the deal.
The terms of the earlier proposal were revised following the central bank's discomfort with the structure of the deal that entailed Axis Bank offering shares to Enam, while the acquisition was done by a subsidiary.
Sources familiar with the developments said the clearance came a few days earlier. While the details of the revised structure were not known, the sources said it would remain an all-stock deal.
The deal would still require approval from other regulators.
According to sources, while Axis Bank would acquire Enam's businesses through shares, the bank's subsidiary, Axis Securities and Sales, may pay cash to the bank before merging the businesses with itself.
The bank's board will soon meet to take stock.
Earlier on Friday, the bank issued a statement that the deal continued to be all-stock.
While giving its in-principle approval for the transaction in April this year, the central bank had also specified certain conditions, expected to increase the bank's tax burden.
As a result, the bank wrote to the RBI,
The terms specified by the RBI included a revised scheme of accounting and change in the eventual structure of the business proposed to be acquired.
According to sources, the bank was exploring different options to revise the deal structure without attracting additional tax burden.
The bank had also said upon examining the implications of the conditions, it had sought certain modifications to the approval granted by the RBI.
"Pending the receipt of the necessary approvals, no effect of the acquisition has been given to the financials for the quarter ended June 30, 2011," the bank had said.
The RBI had also stalled Axis Bank's plan to induct Vallabh Bhansali, co-founder and chairman of Enam, as an independent director on the bank's board.
Axis Bank had earlier said Enam would de-merge its equities and investment banking businesses into a wholly-owned subsidiary of Axis Bank.
The bank would also de-merge its investment banking business into this subsidiary.
Enam shareholders will get 5.7 shares of Axis Bank for every one share held in the broking company.
In other words, Enam shareholders will get 3.3 per cent stake in the bank on enlarged capital.
The deal value is estimated around Rs 2,067 crore (Rs 20.67 billion).
