Blackstone Acquires Major Stake in India's Federal Bank

In a significant move, private equity powerhouse Blackstone plans to become the largest stakeholder in Federal Bank with a hefty investment of approximately $705 million for a 9.9% equity stake. This transaction highlights the rapidly evolving landscape of private banking in India.

The acquisition will take place through a preferred equity shares and warrants issuance by a Blackstone affiliate based in Singapore. This deal also grants Blackstone the authority to appoint a non-executive director to Federal Bank’s board, showcasing its growing foothold in India's banking sector.

Federal Bank shareholders are set to vote on the preferential share issuance and board appointment during an extraordinary general meeting slated for November 19. Following the news, share prices of Federal Bank in Mumbai climbed by 1.15%, reaching 229 rupees.

This strategic investment arrives amidst a wave of notable deals in the Indian banking sector this year. For instance, Emirates NBD from Dubai recently secured a 60% stake in RBL Bank for $3 billion, while Japan’s Sumitomo Mitsui Banking Corporation acquired a 20% stake in Yes Bank in May and an additional 4.2% in September.

Despite a 9.6% decrease in net profit to 9.55 billion rupees for the September quarter, primarily due to reduced treasury income and increased bad loan provisions, Federal Bank boasts a loan portfolio totaling 2.44 trillion rupees. The infusion from Blackstone is anticipated to enhance the bank's capital base, paving the way for strategic developments and potential growth within India’s competitive private banking arena.