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In Q2 2024, the financial services sector demonstrated resilience amidst economic uncertainties following recent elections. Notably, mergers and acquisitions (M&As) highlighted a trend towards consolidation, complemented by robust private equity investments. The market also witnessed successful IPOs, reflecting investor confidence. Supported by improved balance sheets and proactive provisioning, banks and financial institutions are well-positioned for continued expansion.
Key insights from the Financial Services Dealtracker Q2 2024:
Strong PE activity boosts investments: Q2 2024 recorded 15 M&A transactions worth USD 867 million across the spectrum of financial services, i.e., fintech, asset management, insurance, and NBFC. Additionally, PE funds invested USD 1.6 billion in 49 transactions, witnessing the highest volumes and the second-highest values since Q3 2022. This was during a period of relative uncertainty due to election results and resulting churn in economic activity.
Investor performance sees uptick with IPOs: While PE activity has been largely driven by primary investments, Domestic deals dominated in terms M&A volumes, indicating a strong preference for local strategic investments and consolidations. This positive trend has been further bolstered by the issue of three IPOs, i.e., Aadhar Housing Finance Limited, Go Digit General Insurance Ltd, and Akme Fintrade India. Additionally, the RBI, in its Financial Stability Report has observed that with improved balance sheets, enhanced provisioning of bad loans, and sustained capital adequacy, the banks and financial institutions are showing a positive outlook.
Resilient growth and sector outlook: There is a healthy demand for companies in the sector and a focus on consolidating value and deepening strength with a clear view that the broader market respects healthy listings. As overall deal activity picks up, the financial services sector seems set to remain an area of continuing interest.
