Investment powerhouse Blackstone is poised to take the lead as the largest shareholder in Federal Bank, investing approximately $705 million for a 9.9% ownership stake. This move is part of the expanding landscape of private banking in India, which has seen significant activity this year.
The transaction will be conducted through a Singapore-based affiliate of Blackstone, utilizing preferential equity shares and warrants. In addition, this deal grants Blackstone the ability to appoint a non-executive director to Federal Bank’s board, further solidifying its influence in India’s financial sector.
Federal Bank’s shareholders are anticipated to vote on the share issuance and board appointment during an extraordinary general meeting scheduled for November 19. Following the announcement of this investment, shares for Federal Bank in Mumbai rose by 1.15%, reaching 229 rupees.
This influx of capital comes at a time of significant transactions in the Indian banking industry. Recently, Dubai's Emirates NBD bought a 60% stake in RBL Bank for $3 billion, while Japan's Sumitomo Mitsui Banking Corporation acquired 20% of Yes Bank earlier in May and an extra 4.2% in September.
Federal Bank, which boasts a loan portfolio of 2.44 trillion rupees, reported a decline of 9.6% in net profit to 9.55 billion rupees for the September quarter, attributed to reduced treasury income and increased provisions for bad debt.
The investment from Blackstone is expected to provide the bank with a robust capital boost, positioning it strategically for growth and potential expansion in the competitive landscape of India's private banking sector.
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