The financial services sector has emerged as a key segment of interest for private equity and venture capital (PE/VC) investments as deals worth USD 4.2 billion were announced in the first half of this year, says a report.
The financial services sector has emerged as a key segment of interest for private equity and venture capital (PE/VC) investments as deals worth USD 4.2 billion were announced in the first half of this year, says a report. According to the EY-IVCA latest report, the first half of this year has seen the highest ever half-yearly PE/VC investment in the financial services sector with USD 4.2 billion invested across 74 deals.
Investors are betting on this segment as a significant section of the Indian population is still unpenetrated by financial services and there is a huge growth potential for the financial services industry as the Indian economy continues to grow at a healthy rate of more than 7 percent, the report said. “This confidence of PE/VC investors in the Indian financial services story could in our view, be further bolstered by Berkshire Hathway’s first investment in India, in Paytm, a PE/VC backed financial services company,” said Vivek Soni, Partner and National Leader for Private Equity Services, EY India.
Soni further said that “with innovation in technology abounding, Indian Financial Services sector is at an inflection point, the Berkshire-Paytm transaction could potentially be an important milestone in the evolution of the India story”. There were investments made across all the varied business models ranging from pureplay banks to specialised NBFCs, small finance banks, online credit platforms, insurance companies, and payment solution companies.
The report further noted that the financial services sector received the highest share, around USD 16.6 billion, in investments from PE/VC since 2015. Among key sub sectors of financial services, the sector witnessed 28 transactions in 16 targets during the period 2015 to the first half of this year, while non-banking finance company (NBFC) attracted 107 PE/VC investments.
Since 2015, the insurance sector received a total of 29 PE/VC investments, housing finance sector (18 transactions), payments (26 deals) and fintech (96 deals). “PE/VC investments into India have witnessed steady and structural growth over the last few years (continuing into 1H18),” Padmanabh Sinha, Chairman IVCA and Managing Partner, Tata Opportunities Fund said, adding that “in terms of high quality governance, consistent performance and growth, job creation and taxes, the companies backed by PE/ VC funds have shown better performance vis-à-vis other companies”.