Federal Bank shares rally 3% to hit record high. What's behind the frenzy?

Core Viewpoint - Blackstone is set to acquire a 9.9% stake in Federal Bank for $705 million, marking a significant investment in India's banking sector and positioning Blackstone as the largest shareholder of the bank [1][9]. Investment Details - The acquisition will be executed through preferential equity shares and warrants, pending shareholder and regulatory approvals from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI) [2][10]. - An extraordinary general meeting for shareholders to vote on the proposal is scheduled for November 19 [2][10]. Financial Performance - Federal Bank reported a loan book of ₹2.44 trillion and a net profit of ₹955 crore for the September quarter, reflecting a 9.6% year-on-year decline due to weaker treasury income and increased provisioning for bad loans [3][10]. Industry Context - The investment by Blackstone is part of a broader trend of significant foreign investments in Indian banking, including recent deals such as Emirates NBD's ₹26,853 crore investment in RBL Bank and Sumitomo Mitsui Banking Corporation's acquisition of a 24.2% stake in Yes Bank [7][10]. - Gurmeet Chadha, a financial expert, views Blackstone's investment as a positive endorsement of Federal Bank's new leadership and anticipates further banking reforms from the RBI [7][10]. - Uday Kotak, a veteran banker, expressed optimism about the liberalization of India's banking sector, suggesting that opening up to global financial institutions could enhance the sector's capacity to meet India's aspirations [8][10].