India’s financial services sector saw deal activity slump in the first quarter of 2026, as the absence of large transactions and rising geopolitical uncertainty weighed on investor sentiment, according to a report by Grant Thornton Bharat.
A total of 63 deals worth USD 2 billion were recorded during the quarter, marking a 30 per cent decline in volumes and a steep 90 per cent fall in value compared with the previous quarter, the firm said in its Financial Services Dealtracker report.
The sharp drop was largely driven by a lack of big-ticket transactions. Only five deals were recorded in segments that had collectively contributed USD 16.8 billion across 19 deals in the preceding quarter. No billion-dollar deals were recorded in the January–March period, underlining a shift towards smaller, more cautious investments.
Mergers and acquisitions activity bore the brunt of the slowdown, with 16 deals worth USD 0.3 billion, reflecting the lowest quarterly value since the first quarter of 2025. Average deal sizes shrank dramatically from USD 333 million in the previous quarter to just USD 18 million, highlighting subdued risk appetite among investors.
Private equity and venture capital activity, while also moderating, remained the dominant contributor to deal flow. The segment accounted for 45 deals valued at USD 1.6 billion, supported by continued interest in scalable and credit-driven financial platforms. However, investments were largely concentrated in small-ticket deals below USD 50 million, indicating a more selective approach to capital deployment.
Public market activity weakened significantly, with just one initial public offering worth USD 110 million and one qualified institutional placement worth USD 3 million. Combined volumes plunged 98 per cent compared with the previous quarter, reflecting volatility in capital markets and heightened global risks.
The report attributed the broader slowdown to a mix of geopolitical tensions, energy and supply chain uncertainties, and global policy ambiguity. The ongoing conflict in West Asia and tariff-related pressures have further dampened sentiment, even as India continues to post stable domestic growth and low inflation.
Sectorally, fintech, banking and non-banking financial companies remained the backbone of deal activity, contributing 79 per cent of volumes and 85 per cent of total value. Fintech alone accounted for 54 per cent of total deals by volume, though both volumes and values declined sequentially as activity normalised after a strong previous quarter.
Banking and NBFCs emerged as the largest contributors by value, accounting for USD 1 billion across 16 deals, supported by a handful of large transactions. Strong fundamentals such as credit growth, improving asset quality and digital lending adoption continued to attract investor interest.
In contrast, the insurance and financial services segments witnessed a sharp pullback. Insurance deal volumes and values fell 63 per cent and 86 per cent, respectively, while financial services and asset management declined 53 per cent and 79 per cent, reflecting a pause in capital deployment amid uncertainty.
Among notable transactions, Indriya Limited’s USD 299 million investment in Aditya Birla Housing Finance and Carlyle Group’s USD 228 million investment in Nido Home Finance stood out as the largest private equity deals. On the M&A side, transactions remained modest, with the largest deal valued at an estimated USD 81 million.
Domestic transactions continued to dominate volumes, accounting for 81 per cent of M&A activity, while inbound deals contributed a larger share of value despite limited participation.
Looking ahead, Grant Thornton Bharat said the outlook for 2026 remains uncertain, with deal activity likely to stay cautious until global risks ease. However, it noted that policy continuity, a resilient domestic market and ongoing infrastructure development could support a gradual recovery in investment activity. |
