Friday, April 15, 2011

Goldman Sachs Expands in India

WSJ: Goldman Sachs to Bolster India Business
The Hindu Business Line: Goldman Sachs Gets RBI Nod for Primary Dealership
Bloomberg: Goldman Sachs Gets Approval for Indian Primary Dealer Permit
Businessweek: Goldman Sachs Finds It Slow Going in India

Goldman Sachs is bolstering it equity and debt capital market business in India. Anshul Kriskhan, managing direct of Goldman Sachs (India) said, “All the core businesses Goldman Sachs operates around the world are represented on the ground in India.” Mr. Kriskhan also said that Goldman Sachs will further augment is capital markets activity, including debt. The bank operates of out Bangalore and Mumbai, and conducts investment banking, global investment research, and operations and technology practices.

Goldman Sachs has applied for a banking license in India, and it expects to receive the license in the next three to six months. The license allows Goldman Sachs to trade currencies and trade derivates. Goldman Sachs trails its competitors, Morgan Stanley and Citigroup, in getting a license. On Friday, the Reserve Bank of India gave Goldman Sachs approval for a primary dealership that would allow it to underwrite government bonds starting April 18, 2011. Primary dealers are banks, brokers, dealers, or other financial institutions that deal in government securities. The permit for the primary dealership will let Goldman Sachs compete to help the Indian financing ministry raise 4.17 trillion rupees, which is $94 billion.

Indian economic expansion drove mergers and stock offerings to records last year, and India is among the emerging markets that Goldman Sachs is targeting as the firm faces more restrictive rules in the U.S. and Europe on how it can manage and deploy its capital. The bank’s annual revenue in India from all of its businesses is about $100million, which is a 0.25% of the bank’s $39.2 billion in worldwide revenue last year. Indian investment banking fees, although growing, are still a fifth of China’s at $1 billion, and Indian customers are price sensitive compared to other global markets, so Goldman’s expensive, but high quality services, may be a hard sell in India.

Goldman Sachs has invested $2 billion in India, almost all of it since 2005, by buying shares of companies like Benchmark Asset Management Co., which is based in Mumbai. The purchase gave Goldman Sachs access to a market where assets managed by mutual funds tripled to 6.8 trillion rupees over the last five years.

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