MC Exclusive | Federal Bank to roll out preferential issue for 9.99% stake

The Federal Bank

In what is expected to be the first major equity raise plan by Federal Bank since KVS Manian took charge as its MD & CEO, the bank is set to roll out a preferential issue for Rs 5,000 – 6,000 crore amounting to 9.99 percent of fresh equity capital into the bank.

Highly placed sources add that a large private equity major is set to mop up significant minority stake as a single shareholder in the preferential issue. It is gathered from sources that a few PE majors had been approached, and US major Blackstone could be the front runner to pick up the stake. “There was serious interest from 3 – 4 large PEs, though Blackstone made a better offer,” said a banker aware of the deal talks.

The preferential issue would also allow the incoming shareholder to secure one board seat in the bank. The sources cited add that the preferential issue may be priced at Rs 210 – 215 per share.

While email sent to Federal bank remained unanswered, Blackstone’s official spokesperson declined to comment.

“Blackstone has predominantly made investments in non-banks and wealth management outfits in India. So far it has not shown interest in the banking sector,” said an investment banker who did not want to be named. “This deal may be a departure for Blackstone from it’s usual investment philosophy and might be doing this to test the terrain”.

On October 18, Federal Bank’s management announced that the bank will explore fund raise options (https://www.moneycontrol.com/news/business/federal-bank-board-to-weigh-fund-raising-options-on-october-14-13623009.html).

The bank’s board first announced plans to raise capital through a mix of equity and debt amounting to Rs 6,000 crore in June 2025. Further details of the fund raise is expected to emerge on Friday this week.