Kerala-based private lender Federal Bank Ltd. has approved the issuance of convertible warrants on a preferential basis to Asia II Topco XIII, an affiliate of private equity firm Blackstone, triggering a rise in its stock on Friday, October 23.
The bank will issue 27.29 crore warrants, each allowing subscription to one fully paid-up equity share at ₹227 per share, roughly matching Thursday’s closing price. This investment will bring in ₹6,196 crore from Blackstone. Investors will pay 25% of the warrant price upfront and the remaining 75% when exercising the warrants.
Upon shareholder approval, Blackstone will gain a special right to nominate one non-executive director to Federal Bank’s board if it holds at least 5% of the paid-up capital. Following full conversion of warrants, Blackstone’s stake will reach 9.99%.
Federal Bank’s strong financials include a CRAR of 15.71% and a tier-1 capital ratio of 14.37% at September-end, well above regulatory norms, with a credit-deposit ratio of 84.7%.
The move aligns with recent private equity activity in mid-sized banks, including Emirates-NBD in RBL Bank, SMBC in Yes Bank, and Warburg Pincus in IDFC First Bank. Federal Bank shares rose 1.6% to ₹232.2, up 18% in the past month, making them positive for the year-to-date.
