Private sector bank – Federal Bank announced that global private equity giant Blackstone will invest ₹6,196.51 crore in the bank to acquire a 9.99% stake. The investment will be made through Blackstone’s affiliate, Asia II Topco XIII, by subscribing to warrants issued on a preferential basis. This move is expected to strengthen Federal Bank’s capital base, improve its financial ratios, and support its long-term growth plans.
With this, Federal Bank has become the 3rd major Indian Bank to sell its stake to a Foreign institution. Earlier, YES Bank had sold its stake to SMBC Japan. RBL Bank has also sold its stake to Emirates NBD and there are talks to sell stake of IDBI Bank also to a foreign institution.
Blackstone Inc. is an American alternative investment management company based in New York City. It was founded in 1985 as a mergers and acquisitions firm by Peter Peterson and Stephen Schwarzman, who had previously worked together at Lehman Brothers.
Transaction Details
Under the agreement, Blackstone will acquire up to 272.97 million warrants, each convertible into one fully paid equity share of Federal Bank.
- Face Value: ₹2 per share
- Issue Price: ₹227 per share (including a premium of ₹225)
- Tenure: 18 months from the date of allotment
Blackstone will pay 25% of the issue price upfront, while the remaining 75% will be paid at the time of conversion. If the warrants are not converted within 18 months, they will expire, and the initial payment will be forfeited. This structure allows Blackstone to invest gradually without immediately changing the bank’s ownership pattern.
Governance Rights for Blackstone
Federal Bank’s board has approved a special right for Blackstone. Once all the warrants are converted and the firm holds at least 5% of the paid-up share capital, it will have the right to nominate one non-executive director to the bank’s board. This step ensures that Blackstone not only contributes capital but also plays a role in strategic governance, reflecting its long-term commitment to the investment.
Impact on Financial Strength
The capital infusion is expected to significantly boost Federal Bank’s capital ratios. According to InCred Equities, the Common Equity Tier 1 (CET-1) ratio will rise by 2.8 percentage points, reaching 18%. This improvement will likely increase the book value by 4% by FY27 and add 7 basis points to the Return on Assets (RoA).
Citi Research also projected strong long-term gains. Net worth could rise by 14% by FY28 after full conversion of warrants. Book value may increase by over 2%, while the CET-1 ratio could improve by more than 200 basis points. The RoA may go up by 5 basis points, with Return on Equity (RoE) dilution below 1%. Earnings Per Share (EPS) dilution is estimated at 6%. Citi has maintained a target price of ₹250 for Federal Bank post-fundraise.
Approval Process
The deal still requires shareholder and regulatory approvals, which is a standard procedure for large private equity investments in Indian banks. Once approved, the transaction will be completed over the next few months.
Growing Foreign Interest in Indian Banks
With this deal, Blackstone joins a growing number of foreign investors who are buying stakes in mid-sized Indian banks. The trend shows rising global confidence in India’s banking sector, especially in banks with a strong retail and SME franchise like Federal Bank. While the Federal Bank–Blackstone deal has been widely welcomed for strengthening the bank’s capital base, it also raises important questions about the growing role of foreign investors in India’s banking sector. Experts point out that as global private equity funds and foreign institutions increase their stakes in Indian banks, there could be long-term implications for ownership patterns, decision-making, and financial sovereignty.
