Post by : Badri Ariffin

In a landmark move, private equity leader Blackstone is poised to become the largest shareholder of Federal Bank by investing approximately $705 million for a 9.9% stake. This strategic acquisition adds to the momentum of private banking transactions in India.

The deal will be facilitated through an affiliate based in Singapore, utilizing preferential equity shares and warrants. This arrangement grants Blackstone the authority to appoint a non-executive director to Federal Bank's board, enhancing its role in the Indian banking landscape.

Federal Bank shareholders are set to vote on the preferential share issue and the board seat during an extraordinary general meeting on November 19. Following the announcement, the bank's shares jumped by 1.15% in Mumbai, reaching 229 rupees.

This investment coincides with a wave of high-profile transactions within the Indian banking sector this year. Notably, Emirates NBD from Dubai has recently taken a 60% stake in RBL Bank for $3 billion, while Japan's Sumitomo Mitsui Banking Corporation acquired 20% of Yes Bank in May and 4.2% more in September.

Federal Bank, which holds a loan portfolio valued at 2.44 trillion rupees, reported a 9.6% drop in net profit to 9.55 billion rupees for the September quarter, attributed to decreased treasury income and increased provisions for non-performing loans.

This investment from Blackstone is anticipated to offer a significant capital infusion, positioning Federal Bank for robust growth and potential expansion within India's competitive private banking sector.