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The latest edition of Financial Services Dealtracker highlights the positive global economic outlook, with most central banks signaling potential interest rate reductions amidst geopolitical tensions. The industry anticipates strong tailwinds driven by supply chain realignments, interest rate reversals, and renewed capex cycles, promising opportunities for consolidation, particularly in fintechs aligning with traditional businesses. Despite tepid deal making, the financial sector in India is poised for growth, fueled by robust capital markets and buoyant fund flows into mutual funds and AIFs.
Optimistic outlook for financial services sector ahead: With elections in many parts of the world this year, supply chain realignments are continuing. Given the disruptions due to war and movement to diversify from China, interest rate cycle reversals and renewed capex cycles, the financial sector is poised to see some strong tailwinds. In India, the balance sheets of most lenders are strong, with buoyant capital markets keeping fee businesses active. Though deal making has been weak overall, capital markets and IPOs have seen a good run. With strong fund flowing into mutual funds and AIFs, the sector is well poised to benefit from the opportunity the year promises.
Rising focus on ESG factors in investment decisions: There is a growing emphasis on environmental, social, and governance (ESG) factors in investment decisions, leading to the integration of sustainable finance principles into investment strategies. Further, financial institutions are increasingly allocating more capital towards climate friendly projects, supporting a low carbon economy. There is a surge in the issuance of green bonds, sustainable loans and other environmentally focused financial products.
"Given the opportunities over the year and possibly the next five years, one can expect consolidation, particularly in fintechs and the alignment of fintechs with traditional businesses. Therefore, while deals, both corporate M&A and PE, in the sector in India have been tepid in line with the overall deal scenario, we expect it to be a busy year for growth and with it some interesting deals as well."
Vishal Agarwal, Partner and Private Equity Venture Capital Channel Leader, Grant Thornton Bharat
