Axis Bank share price soars 4% after Shikha Sharma exit announcement

Axis Bank share price rallied over 4 per cent on Tuesday after the private sector bank's board curtailed the fourth term of its CEO and Managing Director Shikha Sharma to seven months. This follows an unusual request from her that she be relieved on December 2018, 29 months ahead of the scheduled term. Reacting to the news, the stock gained as much as 4.26 per cent to Rs 540 on the BSE. The stock was the top gainer on Sensex, Nifty and Bank Nifty. Analysts at IDFC Securities believes the change in top management is positive for Axis Bank in the long run, but it doesn't see any short-term benefit. "We believe change in top management is positive in the long run as the new CEO would join at a time when most of the clean-up is done and can focus on reviving earnings growth. But it would lead to short term pressure on asset quality and growth as the team under the existing leadership will likely frontload slippages over Q4FY18-Q3FY19," said IDFC Securities in a research note.  

"There is also a possibility of the stress loan pool rising over the reported levels. Also it will be important to know the profile of the new CEO who will join after Sharma’s new term ends," it added. IDFC Securities maintained Neutral rating on the stock, saying it doesn't see any positive earnings triggers in the short term. The CEO change after six months will add to uncertainty, it said. Axis Bank board's decision come amidst RBI raising questions over Shikha Sharma's re-appointment for the fourth term as Axis Bank MD and CEO in the wake of mounting non-performing assets (NPAs) - the lender is the third largest private sector bank.

Shikha Sharma, who would complete her third term on May 31, 2018, has been heading the bank since 2009. The Axis Bank board accepted her request for a shorter seven-month term (from June 1 to December 31, 2018), subject to the approval of the Reserve Bank of India (RBI), the bank said in a regulatory filing.

The bank said on December 8 last year, the board had decided to reappoint Sharma as the Managing Director and CEO, for a period of three years with effect from June 1, 2018, subject to receipt of requisite approvals. The re-appointment, however, was yet to get the approval of the Reserve Bank of India (RBI).

"In this connection kindly note that Shikha Sharma, Managing Director & CEO of the Bank has requested the Board to reconsider the period of her re-appointment as the Managing Director and CEO of the Bank to be revised from June 1, 2018 up to December 31, 2018," said Axis Bank in a filing to BSE.

The filing did not elaborate why Shikha Sharma wanted her fourth term to be curtailed to seven months from three years.