Mumbai: Goldman Sachs Group Inc., which opened its own operations in India in 2006 after severing its long relationship with the Kotak Mahindra Group, is ready to flex its muscles as the world’s leading securities and investment firm.
Goldman Sachs (India) Securities Pvt. Ltd is readying the launch of an asset management company (AMC) and will follow that up with a primary dealership unit to buy and sell securities. Also on the anvil is a non-banking finance company (NBFC) for an entry into the loan business as well as private wealth management and commodities.
Until now, Goldman Sachs has focused only on investment banking, brokerage and private equity businesses in India. “We are ready to attack all opportunities,” says L. Brooks Entwistle, managing director and chief executive of Goldman Sachs India, in a rare media interview earlier this week. “Having a significant presence in India is a must for any firm that describes itself as global.”
Entwistle, the first employee of Goldman Sachs’ India unit, had made 50 trips to India between 1998 and 2005 before he formally shifted from Hong Kong in March 2006 to set up the India office, which now employs some 100 people in Mumbai, at least 20% of whom have worked in other Goldman Sachs offices across the globe.
Entwistle has already appointed Adam Broader, until recently based in Hong Kong, as the chief financial officer to head the asset management business, and is awaiting the approval from the Securities and Exchange Board of India (Sebi), India’s capital market regulator, to kick off the AMC.
Building presence: Goldman Sachs India’s L. Brooks Entwistle. (Abhijit Bhatlekar / Mint)
In the run-up to the launch of the AMC business, Goldman Sachs is in the process of floating an offshore fund, Goldman Sachs India Fund, this month.
Finally, Goldman Sachs is quietly strengthening its presence in the private equity space where the Blackstone Group Lp. and Temasek Holdings Pvt. Ltd are aggressively going after deals. In the past two years, Goldman Sachs has already invested close to $2 billion (Rs8,060 crore) in some 40 Indian firms.
The list of companies includes OnMobile Global Ltd, a content provider for mobile phones, Sudhir Gensets Ltd, IRB Infrastructure Developers Ltd and Sigma Electric Manufacturing Corp., besides the National Stock Exchange Ltd and National Commodity and Derivatives Exchange Ltd.
Goldman Sachs also wanted to invest around $200 million in ICICI Bank Ltd’s proposed holding company as part of a $650 million deal where three other global investors were involved, but this has not taken place as India’s largest private lender has not yet received regulatory approval.
Most of the private equity deals struck by Goldman Sachs in India are small, but Entwistle says he’s ready “to write much bigger cheques” in the future. “Every day, we are telling our people out here to look for investments across India.”
Other global investment banks such as Morgan Stanley, JPMorgan Chase and Co., and Merrill Lynch and Co. already have a presence in asset management in India, where 32 mutual fund players have been managing total assets worth Rs5.65 trillion by the end of February. Fidelity International, Hong Kong and Shanghai Banking Corp. Ltd and Standard Chartered Bank are some of the other prominent foreign players in India.
Globally, Goldman Sachs manages assets worth $770 billion. Private wealth management is a natural extension of this business and the firm is giving final touches to its plan. Private wealth management is focused on ultra high networth individuals. “The asset management business in India will grow phenomenally as investors have started appreciating stocks as an asset class,” predicts Hemant Rustagi, chief executive of Wiseinvest Advisors Pvt. Ltd, an investment advisory firm.
An NBFC and a primary dealership firm are the other two building blocks that will complete Goldman Sachs’ bus-iness profile in India, at least for now. While a non-banking finance arm will help the securities firm enter the booming lending business, where GE Money and Citi Fianancial are ruling the show, in the fixed-income securities business, Goldman Sachs will compete with 19 primary dealers.
Typically, the daily trading volume in the government bond market is around Rs10,000 crore and the potential for the primary dealership business is huge, as the Union government continues to borrow from the market to bridge its fiscal deficit. The gross market borrowing is Rs1.56 trillion for the fiscal year ending 31 March and, in the next fiscal year, the Union government will borrow Rs1.45 trillion.
Known for its expertise in the commodities trading business, Goldman Sachs is also strengthening its commodities research in India. It cannot start commodities trading yet, because of regulatory restriction, but it is advising corporations, particularly oil companies, on hedging.
Ever since it sold back its 25% stake each in the securities and broking arms of the Kotak Mahindra Group and set up its own shop, Goldman Sachs has been in the thick of business in India although Entwistle isn’t divulging numbers in terms of overall investment made in India or profits.
It managed ICICI Bank’s $4 billion secondary public offering as well as $2 billion debt issue last year and was involved in?Vodafone?Essar Ltd’s $11 billion purchase of mobile phone provider Hutchison Essar Ltd. Its research team now closely tracks 75 Indian stocks and its sales force in London, New York, Singapore and Tokyo aggressively sells Indian equities.
“Every day I wake up in India I’m totally energized,” says Entwistle. “I honestly believe I’ve got one of the best jobs at Goldman Sachs. We are bringing the entire firm to India. All of our divisions are now active and we have a great deal of depth and breath to what we are doing. “This is not an outpost. We are here building businesses with a view of the next 30 years.”