Goldman goes solo with $1 bn kitty Exits decade old joint ventures with Kotak Group; gets Rs 333 crore for 25% in two JVs
MARKETS BUREAU & AGENCIES Posted online: Friday, March 17, 2006 at 0000 hours IST
MUMBAI, MARCH 16: Goldman Sachs, the US-based internationally reputed investment bank and local joint venture (JV) partner of the Kotak Group, said Thursday it had sold its stakes in two JVs for Rs 333 crore ($74 million). Goldman will start its own investment banking and securities businesses in the fast growing Indian market. Goldman also said it would invest $1 billion in India over the next couple of years through its private equity business.
Kotak Bank and its subsidiaries will pay Rs 123 crore for Goldman's stake in Kotak Securities Ltd (KSL) and Rs 210 crore for Kotak Mahindra Capital Company (KMCC). Goldman held 25% stake each in KMCC, an investment bank, and KSL. Following the deal, both these JVs will become wholly-owned subsidiaries of Kotak Bank.
Brooks Entwistle, CEO, Goldman Sachs (India) said in a statement, "The Indian market represents tremendous growth and opportunity. Now, more than ever, there is a compelling case for us to build an onshore presence which is fully integrated with our global businesses." There comes a time when both firms have to go their own way and this was really driven by market opportunities," Mr Entwistle told Reuters. "We needed to be here."
The Kotak Bank shares gained 7.21% on Thursday to close at Rs 246.95 on the Bombay Stock Exchange.
Kotak group said its move to buy out Goldman was part of its aspiration to be a global financial institution on its own. Uday Kotak, executive vice-chairman and managing director, Kotak Bank said, "The purchase of the Goldman Sachs stake involved three important points. The first step is, the group has integrated financial product offerings for customers. The group always aspired to create an Indian financial institution with global class and capabilities and this is a reinforcement of that vision."
"Basically, we are consolidators and have decided to consolidate our stake in the core areas and that is the reason why all the investments in the financial sector have been integrated. This was also one of the reasons behind exiting from Hutchison recently," he added.
Goldman and Kotak Bank said they would maintain ties through a business cooperation agreement which will last for one year. Kotak joined up with Goldman Sachs in 1992, and the two formed an equity joint venture four years later.
A head of research of a domestic brokerage said, "People are seeing huge opportunities in India. The economy is booming and the equities markets are set to do well for the next five to 10 years." It's not that only India's secondary market is booming, but also the primary market. India's corporate sector has raised over Rs 22,000 crore through IPOs and FPOs in FY 2005-06.