Citi India is gearing up for what promises to be an exciting year in the country’s financial markets. Ashu Khullar, the Chief Executive of Citi India, recently shared insights into the bank’s expectations and strategies for 2023 in an interview with Reuters. The focus is primarily on the equity capital market, given the favorable economic conditions and increasing investor confidence.
In 2022, India’s equity capital markets raised an impressive $19.4 billion, according to data from the London Stock Exchange Group (LSEG). However, Khullar believes that 2023 could see even more substantial activity, with expectations ranging between $20-22.5 billion in deals. This optimism is rooted in several key factors.
Firstly, initial public offerings (IPOs) are making a strong comeback. The market has witnessed a flurry of IPOs, reflecting the confidence of companies in raising capital through the equity route. The renewed interest in IPOs is a testament to the robustness of India’s financial markets and the growth potential perceived by businesses.
Additionally, there has been a surge in block deal activity, driven by the favorable market conditions. Block deals involve the sale of a large number of shares in a single transaction and are often used by institutional investors and promoters to divest their holdings. This activity suggests that investors are actively seeking opportunities in the Indian market.
Furthermore, institutional share sales are now becoming increasingly prominent. Institutional investors, both domestic and foreign, are looking to capitalize on the current market sentiment and liquidity, further contributing to the growth of the equity capital market.
Foreign portfolio investors (FPIs) have played a significant role in bolstering India’s equity markets. In 2023, FPIs have invested a net sum of $11 billion in Indian equities, as reported by India’s National Securities Depository. This influx of foreign capital has not only provided a boost to the markets but has also helped drive India’s benchmark equity indexes to record highs.
Mergers and acquisitions (M&A) are also on the rise in India. Deals worth a staggering $85 billion have been struck in the current year, with Citi India holding a substantial 22.6% market share in this segment. As India continues to attract interest as a market, M&A activities are expected to gain momentum. Companies and investors are exploring both organic and inorganic avenues to establish a presence in India’s dynamic business landscape.
One pivotal development that could further catalyze India’s financial markets is the country’s recent inclusion in JPMorgan’s emerging markets bond index. This inclusion has the potential to attract an estimated $25-30 billion in debt inflows by the end of the financial year in March 2025. For Citi India, this presents a valuable opportunity to offer a comprehensive suite of services, including market platforms, trading, sales, and custody services, to new investors entering the Indian debt market.
Looking beyond the financial markets, the broader Indian economy is positioned for robust growth. Projections indicate a GDP growth rate of 6.5% for the financial year ending March 31, 2024, solidifying India’s status as the fastest-growing major economy globally.
Citi India is actively engaging with potential investors across Asia and Europe. Khullar noted that “every board wants to have an India strategy,” highlighting the growing interest in incorporating India into investment portfolios. The bank recognizes the significance of India as a strategic market and is actively facilitating discussions to help investors navigate the country’s complex yet promising landscape.
Citi India’s strategic focus has evolved over the years. In March of the current year, the bank concluded the sale of its local consumer businesses to Axis Bank. With this transition, Citi India has shifted its primary focus to institutional businesses, aligning with its global strategy.
Regarding the ongoing global reorganization at Citi, which includes layoffs and reassignments, Khullar expressed confidence that it would have minimal impact on Citi India. He emphasized that as the bank’s focus in India is predominantly on institutional businesses, there is unlikely to be significant disruption to its operations.