Axis Bank has emerged as the top contender to acquire Citibank India’s retail assets, three people with knowledge of the matter told CNBC-TV18 on the condition of anonymity as the deal has not been made public yet.
The deal could be an all-cash transaction, with a valuation of around $2 billion including incentives, as per people in the know. Axis Bank is likely to sign an exclusivity agreement with Citi for the deal very soon, CNBC-TV18 has learnt.
Kotak Mahindra Bank and IndusInd Bank were the other two players who had been in the race to acquire Citi’s India retail business, but Axis Bank emerged as the top contender.
"Kotak Mahindra Bank was widely expected to be the top contender, but Axis Bank came with a better offer," said a person directly in the know. This person indicated the deal could be valued at around $2 billion, but did not give out the specific details.
CNBC-TV18 reached out to both Axis Bank and Citi India for a comment on the story. In an emailed response to the query, Citi India's spokesperson said, "We continue to move forward with our process with respect to our India consumer business sale in accordance with our broader strategic refresh."
Axis Bank is yet to respond to the query. The story will be updated once the bank’s response is received.
On October 22, CNBC-TV18 was the first to report about the bid deadline for Citi's India retail business ending and potential suitors in the fray. While IndusInd Bank, Axis Bank and Kotak Mahindra Bank put in a bid, HDFC Bank did not participate in the process against expectations. DBS India also dropped out of the race and did not submit a bid in October.
Citibank India serves 2.5 million retail customers, with 1.2 million bank accounts and 2.58 million credit card accounts as of October 2021. Citibank India is one of the country's leading credit card issuer, with around 4 percent market share of retail credit card spends in the country. As against Citi, Axis Bank is the country's fourth largest credit card issuer in the country with 7.74 million cards outstanding as of October 20201, RBI data showed.
CLSA earlier said in a note that "For Axis, it would be a valuable acquisition, but again valuation would be a constraint." In the same note, CLSA estimated that using the assumption that retail businesses trade at 10x-15x FY23CL PBT, Citi’s retail book could be valued at $2-2.5 billion.
Citi’s outstanding credit card portfolio in India has been on a decline since the bank announced its intention to exit the India retail business. From 2.73 million cards in October 2020, its outstanding cards fell to 2.62 million in April 2021 and then further to 2.58 million by October. This, despite a ban on HDFC Bank from issuing new cards for nine months during the period, during which time, other banks gained market share.
Even with a lower market share, Citi's book has been attractive to other Indian banks due to its premium and corporate salary accounts, and high spends on its cards.
Earlier in April this year while announcing its first-quarter earnings for 2021, Citigroup’s global CEO Jane Fraser announced the bank’s exit from consumer banking in 13 countries including India.
Citi bank has been in India for 119 years, since 1902 when it started operations in Kolkata. It currently has 35 branches across the country and employs over 4,000 people in consumer banking.