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What is the story about?
Kerala-based private sector lender Federal Bank Ltd. has approved the issue of convertible warrants on a preferential basis to Asia II Topco XIII, an affiliate of private equity firm Blackstone. The stock has risen on Friday, October 23, in response to the announcement.
Federal Bank has approved the issue of 27.29 crore warrants, each carrying a right to subscribe to one fully paid-up equity shares of the bank at a price of ₹227 per share, which is nearly the same price at which the stock closed on Thursday.
At ₹227 per share, the amount that Blackstone will be infusing into Federal Bank would be ₹6,196 crore. 25% of the warrant issue price will be payable at the time of subscription of each warrant, and the remaining 75% will be payable at the time of exercise of the options attached to the warrants to subscribe to the equity shares.
Subject to approval of shareholders of the bank, Blackstone will receive a special right to nominate one non-executive director of the board upon exercise of all the warrants, and subject to holding at least 5% of the total paid-up share capital.
Post the conversion of warrants into equity shares, Blackstone will be holding a 9.99% stake in Federal Bank.
Moneycontrol had reported earlier that this will be done through a preference issue of shares of up to 9.99% of the total equity and a few major private equity players have been approached.
At the end of the September quarter, Federal Bank had a Capital to Risk-weighted Assets Ratio (CRAR) of 15.71%, tier-1 capital ratio of 14.37%, compared to regulatory requirements of 9% and 6% respectively. Its Credit-Deposit ratio is also at 84.7%.
Federal Bank's board meet also assumed significance as there have been a slew of deals with mid-sized banks this year, where marquee investors have pumped in big funds.
As recently as last week, Emirates-NBD announced that it will be investing close to ₹27,000 crore in RBL Bank to acquire up to 60% stake, including the mandatory open offer.
In May, Japan's Sumitomo Mitsui Banking Corporation (SMBC) acquired a stake of over 20% in private lender Yes Bank, while a Warburg Pincus affiliate acquired a 9.48% stake in IDFC First Bank.
Shares of Federal Bank are trading 1.6% higher after the announcements, having made a new high of ₹232.2. Shares have gained 18% in the last one month, thereby turning positive on a year-to-date basis.
Federal Bank has approved the issue of 27.29 crore warrants, each carrying a right to subscribe to one fully paid-up equity shares of the bank at a price of ₹227 per share, which is nearly the same price at which the stock closed on Thursday.
At ₹227 per share, the amount that Blackstone will be infusing into Federal Bank would be ₹6,196 crore. 25% of the warrant issue price will be payable at the time of subscription of each warrant, and the remaining 75% will be payable at the time of exercise of the options attached to the warrants to subscribe to the equity shares.
Subject to approval of shareholders of the bank, Blackstone will receive a special right to nominate one non-executive director of the board upon exercise of all the warrants, and subject to holding at least 5% of the total paid-up share capital.
Post the conversion of warrants into equity shares, Blackstone will be holding a 9.99% stake in Federal Bank.
Moneycontrol had reported earlier that this will be done through a preference issue of shares of up to 9.99% of the total equity and a few major private equity players have been approached.
At the end of the September quarter, Federal Bank had a Capital to Risk-weighted Assets Ratio (CRAR) of 15.71%, tier-1 capital ratio of 14.37%, compared to regulatory requirements of 9% and 6% respectively. Its Credit-Deposit ratio is also at 84.7%.
Federal Bank's board meet also assumed significance as there have been a slew of deals with mid-sized banks this year, where marquee investors have pumped in big funds.
As recently as last week, Emirates-NBD announced that it will be investing close to ₹27,000 crore in RBL Bank to acquire up to 60% stake, including the mandatory open offer.
In May, Japan's Sumitomo Mitsui Banking Corporation (SMBC) acquired a stake of over 20% in private lender Yes Bank, while a Warburg Pincus affiliate acquired a 9.48% stake in IDFC First Bank.
Shares of Federal Bank are trading 1.6% higher after the announcements, having made a new high of ₹232.2. Shares have gained 18% in the last one month, thereby turning positive on a year-to-date basis.
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