Federal Bank’s board has approved the sale of 9.99% stake to an affiliate of US private equity firm Blackstone for Rs 6,196.5 crore. 

The capital infusion will establish Blackstone as the bank’s single-largest shareholder. It will also go to support the Kerala-based mid-sized bank’s move to establish a national footprint and become India’s fifth-largest private sector lender. 

Federal Bank will issue 27.29 crore preferential warrants with each priced at Rs 227 via private placement.

The investor will pay 25% upfront and the rest at conversion. Warrants must be exercised within 18 months, after which any unconverted warrants will lapse with no refund. 

The investor can nominate one non-executive director once the converted holdings hit 5% of the bank’s paid-up share capital. The investor is not part of the promoter group.

Blackstone will make the transaction through its group entity, Asia II Topco XIII Pte Ltd.

"The bank has executed an investment agreement dated October 24, 2025, with the Investor (Asia II Topco XIII Pte Ltd," Federal Bank said in a regulatory filing.

The extraordinary general meeting (EGM) to seek shareholders’ approval to the preferential warrant issue by the bank and special right to the investor to appoint a director will be held on November 19, via video conferencing.

Blackstone’s investment will boost Federal Bank’s Common Equity Tier 1 (CET1) ratio, thus improving its capital adequacy position. The funding will support the bank’s expansion plans, analysts said.

Earlier, Federal Bank managing director and CEO KVS Manian had stated that his goal was to lift the bank's position to the No. 5 spot within three years, from its then status of ninth rank among private sector lenders.

The bank has chalked out plans to shift its assets mix towards a higher proportion of medium-and high-yielding loans. The strategy also involves scaling up deposits, improving the CASA (current account savings account) ratio and adding branches largely outside Kerala.

The mid-sized banking space is set to get more competitive, particularly after Yes Bank and RBL Bank have found foreign banks Sumitomo Mitsui Banking Corporation (SMBC) and Emirates NBD acquire stakes in them.