Federal Bank: NSE, BSE seek clarity on report of preferential issue for 9.99% stake

Stock exchanges NSE and BSE have sought clarification from The Federal Bank regarding a media report suggesting the lender was looking to roll out preferential issue for 9.99 per cent stake. The response from the company is awaited, exchanges said. The report comes at a time the bank continued witnessing balance sheet consolidation with loans and deposits growing slower than industry average. Yet, brokerages such as Ambit Capital appreciated visible rise in better-yield loans and low-cost CASA share which drive sequential improvement in margins during the September quarter. 

According to a Moneycontrol report, a large private equity firm is likely to acquire a significant minority stake as a single investor through Federal Bank’s proposed preferential issue. Sources indicated that several PE majors had been approached, with US-based Blackstone emerging as the frontrunner. The report quoting sources suggested that there was serious interest from three to four large PE firms, though Blackstone made a more attractive offer. 

In the September quarter, Federal Bank reported sequential decline in fresh slippages led by initial stabilisation in MFI portfolio, even as the management preferred to remain watchful. 

"We are moderating our credit/deposit growth estimates by 2 per cent for FY26E, but increase our margin assumption by 2 bps. We await better deliverance on fee income and further stability on MFI front. Maintain BUY with target of Rs 250. Prefer Karur over Federal Bank due to limited volatility and superior return ratios for KVB," Ambit said.

PL Capital said the bank's balance sheet calibration is progressing well, woth low yielding corporate and housing share falling 100 bps YoY to 49.6 per cent. Due to faster downward repricing of liabilities, NIM may improve in H2FY26, it said while remaining watchful of opex. 

"We revise our target price to Rs 230 (earlier Rs 235) and with limited upside we downgrade the
stock to HOLD rating. We are valuing the standalone bank at 1.3x on its FY27E book value per share of Rs. 167. Further we assign Rs 16.5 per share value to its subsidiaries and associates," Systematix Institutional Equities said.