Consumer Tech, Renewables Top Themes as M&A Activity Picks Up

25 Dec 2024 CW Team

Consumer technology, renewable energy, and healthcare sectors are expected to dominate investment banking activities in 2025, even as a slowdown in earnings growth over the next two quarters, driven by weakening demand, may lead to corrections in equity valuations, according to Pramod Kumar, CEO of Barclays India.

The UK-based bank, which derives more than half of its revenue from investment banking in India, remains cautious about lending to non-banking financial companies (NBFCs) until the sector increases its provisions.

"The biggest risk to current valuations is likely to come in the next couple of quarters. Earnings growth could disappoint due to inflation, leading to a slowdown in demand... However, we won’t see a significant drop in markets, given the strong economic growth and large domestic inflows that are supporting them," Kumar said.

Barclays' total assets in India remained stable at Rs 53,910 crore for the fiscal year ending March 2024. However, it reduced its loan book by approximately 5% to Rs 9,026 crore from Rs 9,467 crore, while increasing its cash balances with the central bank by 68% to Rs 1,030 crore, reflecting increased risk aversion. The bank’s investments, on the other hand, grew by 13% to Rs 33,137 crore from Rs 29,425 crore in March 2023.

Kumar mentioned that Barclays reduced its exposure to NBFCs amid early signs of stress in the sector, focusing instead on larger NBFCs. He expects merger and acquisition (M&A) activity to rise in 2025, following a period of subdued deal-making.

"M&A activity was somewhat muted this year, primarily due to stretched valuations. However, with a reduction in US interest rates, the dollar bond market could become active, and we may see more inbound strategic interest into India," Kumar said.

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