Blackstone to Acquire 9.99% Stake in Federal Bank for ₹6,200 Crore

Strategic Insights -

The global investor Blackstone is set to acquire a nearly 10% stake in Kerala-based Federal Bank, in a deal worth ₹6,200 crore. This move marks Blackstone's latest bet on India's financial sector, where it has made multiple investments over the years. The acquisition will see Blackstone's affiliate, Asia II Topco XIII Pte. Ltd., gaining a 9.99% stake in the private bank. This deal is part of Blackstone's strategy to expand its presence in India's financial sector, with the company managing assets of $50 billion.

Key Takeaways:

  • The acquisition is worth ₹6,200 crore, with Blackstone's affiliate, Asia II Topco XIII Pte. Ltd., paying 25% of the issue price at the time of warrant subscription and the rest 75% during conversion to shares.
  • The Blackstone affiliate will get to nominate one non-executive director to the bank's board once its shareholding reaches 5%.
  • This deal marks Blackstone's latest investment in India's financial sector, following the acquisition of Aadhar Housing Finance Ltd in 2019 and a Rs.150 crore investment in Fino Ltd in July 2011.
  • Analysts are optimistic about the prospects of more such deals, with Suresh Ganapathy, managing director and head of financial services research at Macquarie Capital, stating that more smaller and mid-sized banks are up for such deals.
  • Federal Bank's board has approved a preferential issue of 273 million warrants worth ₹6,196.5 crore to Blackstone affiliate Asia II Topco XIII Pte. Ltd.
  • Each warrant can be converted to one equity share at a price of ₹227 each, with shares of Federal Bank closing unchanged on BSE at ₹227.4.

Statistics:

  • Acquisition value: ₹6,200 crore
  • Stake acquired: 9.99%
  • Number of warrants issued: 273 million
  • Issue price per warrant: ₹227
  • Subscription price: 25% at the time of warrant subscription and 75% during conversion to shares
  • Assets managed by Blackstone: $50 billion
  • Blackstone's previous investments in India's financial sector: Acquisition of Aadhar Housing Finance Ltd (2019) and a Rs.150 crore investment in Fino Ltd (July 2011)

Sources:

  • Blackstone to buy 9.99% stake in Federal Bank for ₹6,200 crore (Hindustan Times)
  • HT Digital Content Services with permission from Hindustan Times.