Following the private lender’s proposed preferential warrants to Blackstone, brokerages have set higher price goals for Federal Bank Ltd, which has shareholders including Rekha Jhunjhunwala and Zerodha Broking.
In order to invest Rs 6,196.51 crore, or $705 million, in Federal Bank, Blackstone’s Asia II Topco XIII Pte Ltd would issue 27,29,74,043 warrants at a preferential, private placement price of Rs 227 per. Within 18 months following the date of allocation, these warrants can be converted into equity shares. These warrants will represent a 9.9% ownership in the bank if they are exercised into equity shares.
According to our estimates, the warrants will be converted into equity shares by the end of FY26, resulting in an equity dilution of 11.1% and a 280 basis point improvement in the CAR to 18.5% (from 15.7% in September 2025),” Nirmal Bang stated. Federal Bank has been raised from a “Hold” to a “Buy” by the brokerage, with a new target price of Rs 266 instead of Rs 224.
At the end of September 30, Jhunjhunwala owned 2.42% of Federal Bank, while Zerodha Broking owned 1.02%. A 37.52 percent interest in the private lender was held by 47 mutual funds in total. Foreign investors owned 25.54 percent, while insurers owned 9.25 percent.
The stock’s normalized price before this week was Rs 210, indicating a valuation of 1.2 times the adjusted book value as of September 2027.
“Our FY27/28E ABV was Rs 163/Rs 184, indicating a 1.4/1.2 times pre-money valuation. This increase would be BV accretive since the transaction price of Rs 227 would result in a higher post-money valuation of 1.3 times. Assuming that funds are invested in two distinct tranches, namely 25% in Q1FY27 and 75% in H1FY28, the post-money basis accretion to FY27/28E ABV would be 4.1% and 2.7%, according to PL Capital.
NIM for FY27 and FY28 may rise 2-3bps to 3.10 and 3.13 percent, respectively, as a result of the capital boost. This brokerage raised its initial objective of Rs 235 to Rs 250.
“We reiterate Buy with a revised target price of Rs 260, valuing the bank at 1.5x FY27E BV, factoring in enhanced capital strength, a steady earnings outlook and the sector-wide rerating potential from rising strategic foreign ownership in mid-size private banks,” stated the MOFSL.
