Blackstone said on Friday that it will be investing $705 million in India’s Federal Bank for a 9.9% stake. The deal will make the private equity firm the largest shareholder in the bank.
Blackstone will invest in Federal Bank through a Singapore-based affiliate that has entered a share-purchase agreement with the bank. This includes the right to nominate a non-executive director to its board. The deal will be executed through preferential equity shares and warrants, and is subject to approval from shareholders and the banking and competition regulators.
Federal Bank’s shareholders will be meeting in a so-called extraordinary general meeting on Nov. 19 to approve the preferential share issue and board seat.
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The Federal Bank, which has a loan book of 2.44 trillion rupees, posted a 9.6% decline in its net profit to 9.55 billion rupees for the September quarter due to a decline in treasury income and a rise in funds kept aside for bad loans.
Federal Bank also recently said its board has approved an additional stake of up to 4% in IDBI Federal Life Insurance Co Ltd (IFLIC) from IDBI Bank, subject to all relevant regulatory approvals. Its board also approved an investment of ₹148 crore ($16.8 million) in its subsidiary, Fedbank Financial Services, through a rights issue. The company aims to infuse regulatory capital in the firm, and the current investment is more than 5% of the post-issue paid-up capital of FFSL.
Deal-making in India’s private banking sector has accelerated this year. Last week, Dubai-based Emirates NBD acquired a 60% stake in RBL Bank for $3 billion. RBL stated that Emirates NBD will buy a 60% stake in RBL Bank via a preferential issue at ₹280 (~$3.19) per share, a 6.5% discount to the stock’s last close. It also added that it will merge with ENBD’s local business.
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The deal will give RBL Bank a major capital infusion, strengthening its balance sheet and boosting its capacity to lend and expand. Since reports of the deal emerged on October 13, stock has climbed 10% and more than doubled so far this year, compared with a 15% climb in the private banks sub-index. The bank, on Saturday, also reported a 20% drop in its quarterly profit on elevated write-offs in its credit card book.
Earlier, Japan’s Sumitomo Mitsui Banking Corporation purchased a 20% stake in Yes Bank in May, followed by an additional 4.2% stake in September.
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