Inside the Money Moves: Federal Bank Eyes ₹4,000 Cr in Bold Expansion Plan

Federal Bank Ltd is preparing to raise fresh capital through a mix of debt and equity instruments, as it gears up for its next phase of growth. The board is expected to consider proposals that include issuing bonds and exploring multiple equity-raising options such as Qualified Institutional Placement (QIP), rights issues, and preferential allotments.

 

While the exact quantum is yet to be finalized, the bank has previously secured shareholder approval to raise up to ₹4,000 crore via equity. On the debt side, it may tap into long-term infrastructure bonds or Basel III-compliant instruments, depending on market conditions. The move is aimed at strengthening the bank’s capital adequacy, supporting loan book expansion, and funding digital and retail growth initiatives.

 

Federal Bank has been actively diversifying its portfolio beyond its home base in Kerala, with growing exposure in Maharashtra, Tamil Nadu, and Karnataka. Its asset quality remains stable, with gross NPAs at 2.11% as of Q1 FY25. The bank’s recent performance has been solid, with a 42% YoY jump in net profit in Q1 FY24 and a strong retail loan growth trajectory.

 

The capital raise is also expected to support inorganic opportunities, including potential acquisitions in the microfinance space. Investment banks like Kotak Mahindra Capital, Axis Capital, BofA Securities, and JP Morgan have reportedly been roped in to advise on the fundraising strategy.

 

Key Highlights:

 

Equity raise of up to ₹4,000 crore under consideration

Debt options may include infra bonds and Tier 2 instruments

Capital to fund retail growth, digital expansion, and M&A

Strong Q1 performance and stable asset quality

 

Sources: CNBC-TV18, Economic Times, News18