Blackstone makes BFSI push, to buy 10% in Federal Bank

Blackstone will invest ₹6,196 crore in Federal Bank for a 9.99% stake, which would make it the largest shareholder in the Kerala-headquartered lender.

With this, the global private equity firm joins a growing list of marquee investors showing interest in India's financial services sector.

Last week, Dubai's Emirates NBD acquired a 60% stake in RBL Bank, soon after Japan's Sumitomo Mitsui Banking Corp's investment in Yes Bank for a 24% stake.


The Blackstone-Federal Bank deal was stitched on Friday. The bank's board approved the issuance, by way of a preferential issue, of about 273 million warrants to Asia II Topco XIII, a Singapore-based affiliate of Balcksotne. Each warrant carries a right to subscribe to one fully paid-up equity share of the bank having a face value of ₹2. The deal was priced at ₹227 per warrant, including a premium of ₹225.

The investment would give the Blackstone affiliate the right to nominate one non-executive director on the board.

Federal Bank will hold an extraordinary general meeting on November 19 to seek shareholders' approval for the preferential share issue and a board seat.

The deal, which would need approvals from banking and competition regulators, is the largest after KVS Manian took over as managing director.

Federal Bank's net advances stood at ₹2.45 lakh crore with deposits at ₹2.89 lakh crore at the end of September. The bank's net profit for the second quarter stood at ₹955 crore, about 10% lower than the year-ago period but about 11% higher quarter-on-quarter.

Manian said the bank endeavours a strategic shift in business, focusing on high-yielding assets while curtailing growth in low-yielding segments such as corporate and home loans to single digits.

"We need to grow but grow profitably," the MD had told analysts last week during a post-earnings call.

The bank's shares closed 0.02% up at ₹227.40 apiece on the BSE on Friday. They rose to 52-week highs at ₹232.25 immediately after the Blackstone announcement.