Financial Services dealtracker: Q3 2023

insight featured image

Interest rate hikes have been on an increasing trend for the most part of 2022 and the first half of 2023, given the elevated inflation that has been experienced globally. Due to the food and fuel inflation, the interest rates are expected to remain elevated for quite some time. This is what seems to be the view of most of the central bankers globally.

India has paused interest rates hikes in the last monetary policy committee meetings. While sentiment is strong all around, capital seems to be cautious, given global headwinds, geopolitics and the upcoming Indian elections.

We observed that most of the deals where private equity funds are involved have been primary investments in fintechs, banks and NBFC, traditionally areas where capital defines growth strategy, even as fintechs look towards profitability and not only cash burn. 

Of the 30 deals undertaken by private equity during the quarter, about 73% were related to the fintech space, with the balance 27% of the deal activities in the NBFC space – primarily focused on housing, MSME, microfinance and education. Also, close to 60% of the M&A activities were driven in the country by investors in India, with only 40% of the balance being driven between the UK, Europe and Japan.

With global interest rates expected to be elevated for quite some time, we see a lot of investor interest in the financial services businesses, especially the ones focused on lending, given the margins that high interest rates bring for credit-focused financial services businesses.