"Let's Go to India"... Global IB Focuses on Indian Market Instead of China

India's Annual Growth Rate of 6-7%
"Low Brokerage Fees but High Potential, Promising"

Global investment banks (IBs) are considering entering the Indian financial market, which has great growth potential, instead of China, which is experiencing an economic recession.

Ashish Agarwal, head of the India branch of the U.S. Jefferies Financial Group, said in an interview with major foreign media on the 20th, "We have strengthened our capital markets and core investment banking capabilities over the past three years," adding, "India is a market we are deeply focused on."

Jefferies Financial Group is trying to establish a new growth center in Asia as the once highly profitable Chinese market stagnates. India is highly likely to be at the center of this. Other financial institutions such as Bank of America (BofA), Barclays Bank, and HSBC are also paying attention to the Indian market.

Pramod Kumar, CEO of Barclays Bank India branch, said, "Most banks will take greater risks in expanding exposure to India rather than China," adding, "Compared to the slowdown in China’s activities so far, (India’s strengths) will be even more pronounced." Devashish Purohit, co-head of India investment banking at BofA, also stated, "It is almost impossible for global banks to ignore India."

According to Dealogic, global investment banks are still not earning much revenue from the Indian market. Banks from the U.S., Europe, and Australia generated $342 million (approximately 450 billion KRW) in investment banking revenue in India last year. This is far less compared to $689 million (approximately 920 billion KRW) earned from Chinese clients. However, India is considered a region with significant growth potential, where investment banking-related fees such as mergers and acquisitions (M&A) and initial public offerings (IPO) are expected to increase substantially. India recorded a growth rate of 7.2% last year, and according to International Monetary Fund (IMF) estimates, it is projected to grow at an average annual rate of 6.1% from this year through 2028. Major private equity funds are also increasing their investments in the Indian market. In contrast, due to heightened geopolitical risks from the U.S.-China conflict, there are moves to downsize operations in China, including reducing staff.

Foreign media reported that the low fee revenue from the Indian market is a regrettable point. While IPO brokerage fees in the U.S. can generate 6-7% in revenue, Barclays explained that in India, fees are limited to a maximum of 2-3%. However, investment banks judge that it is more important to enter the Indian market proactively with a long-term perspective to grow their share rather than focusing on fee profits at this time.

Purohit, co-head of BofA, emphasized, "Banks have to choose between low fees and high growth. The Indian market has low fees but is the fastest-growing market. Considering the growth trend, it is clear that India is the most attractive and profitable market."