Federal Bank, YES Bank, RBL Bank, IDFC First: Fundraising to power the next leg of growth

Mid-sized private banking sector is witnessing renewed investor interest, with Federal Bank fresh to join the bandwagon. Analysts said Federal Bank’s pivot toward margin-accretive growth, strengthening its liability profile and improving fee intensity is now further bolstered by the proposed Rs 6,200 crore preferential capital infusion from Blackstone.

Like Federal Bank, many private banks are looking to shore up their capital base to capitalise on the next leg of growth as the unsecured stress is now showing signs of abatement and the recent policy and government measures are seen driving consumption and aiding consumer loan demand.

Global financial investors and sovereign funds have participated in some of the recent fund raises via sizeable preferential issues (Warburg Pincus and ADIA in IDFC First Bank; Emirates NBD’s proposed majority investment in RBL Bank, SMBC in YES Bank, Fairfax in CSB Bank, DBS bank merger with Lakshmi Vilas Bank).

"We curiously look forward to potential divestment of government stake in IDBI Bank as well, which will be another large deal in the sector. These transactions reflect growing investor confidence in India’s growth story as the fastest-growing economy, offering a strong balance of government stability, healthy corporate governance and a more predictable and transparent policy framework," MOFSL said.

The domestic brokerage said India’s long-term policy direction is now unambiguously aligned with its Viksit Bharat vision by 2047. The government remains committed to its stated ambition to make India the world’s third largest economy by 2030, it said adding that to accelerate this growth ambition and to further diversify the global ties the policymakers and the RBI are adopting a more enabling stance to facilitate such large foreign capital participation in the banking system.

"This signals a calibrated shift from regulatory conservatism to facilitative expansion. Regulator has thus signaled a more pragmatic view that well-capitalized shareholders will strengthen the banking system and support systemic resilience. This policy posture will enable large cross-border deals and expedite the path from commitment to capital deployment," MOFSL said.

These transactions, the brokerage said, set interesting precedents and pave the way for many more such meaningful transactions over the coming years.