Federal Bank said on Friday that Blackstone will acquire the stake through a Singapore-based affiliate, which will also have the right to nominate a non-executive director to the bank’s board of directors.
The investment – to be made through preference shares and warrants – is subject to shareholder and regulatory approvals, including from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI). The bank’s shareholders will vote on the proposal at an extraordinary general meeting on November 19.
The Federal Bank, which has a loan book of Rs 2.44 trillion, reported a 9.6% year-on-year decline in net profit to Rs 955 crore for the September quarter, due to weaker government bond income and higher provisioning for bad loans.
Wave of dealmaking in Indian banking
Blackstone’s entry adds to a string of major deals that are reshaping India’s private banking space. Earlier this month, Emirates NBD unveiled plans to invest Rs 26,853 crore in RBL Bank for up to 60% ownership, including an open offer – the largest ever foreign investment in India’s financial services sector.
Earlier this year, Japan’s Sumitomo Mitsui Banking Corporation acquired a 24.2% stake in Yes Bank across two tranches totaling nearly Rs 15,000 crore, while IDFC First Bank raised Rs 7,500 crore from Warburg Pincus and Rs 2,624 crore from Abu Dhabi Investment Authority.
In the non-banking sector, Abu Dhabi’s International Holding Company agreed to inject $1 billion (Rs 8,850 crore) into Sammaan Capital for a stake of up to 41%, while Mitsubishi UFJ Financial Group is in advanced talks to acquire up to 20% of Shriram Finance for as much as $2.6 billion, according to a recent report by the Economic Times.
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Load reforms?
Gurmeet Chadha, Managing Partner and CIO at Complete Circle Consultants, described Blackstone’s investment in Federal Bank as “an affirmation of new leadership and a positive pace of change within the bank.” In a post on
In an earlier post on October 19, Chadha wrote: “BIG bank reforms are heating up. The Emirates NBD-RBL Bank deal signals a major shift in the RBI’s thought process. The largest FDI in banks and equity infusions ever. This and the Sumitomo-Yes Bank deal could open up global fundraising options for Indian banks, which are currently very limited. Ultimately, there will be more reforms, even in the area of voting rights with a maximum of 26% and 9.99%. the commitment to corporate investors – will also be reviewed.”
Chadha noted that the recent record inflows “could open up global fundraising options for Indian banks, which are currently very limited,” while indicating that the RBI’s long-standing ownership restrictions – “capped at 26% and 9.99%” – will soon be re-examined.
Veteran banker Uday Kotak also welcomed the changing tide on the regulatory front. “I welcome the opening of the banking sector to global financial institutions for a majority stake,” he said in a message on
Kotak’s comments reflect broader optimism that India’s banking system is entering a new phase of liberalization, paving the way for deeper global participation under a more flexible regulatory framework.
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(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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