Goldman Sachs, the global investment banking and securities firm, is setting up a subsidiary to replace its representative office in India. The investing banking entity will be called Goldman Sachs India LLC. Uday Kotak, chairman, Kotak Mahindra Capital Company (KMCC), will hold 25 per cent of its equity.
Goldman Sachs and Kotak Mahindra (which is also the largest shareholder in Business Standard Ltd) have also decided to extend their strategic alliance for three years.
According to a release issued by Kotak Mahindra, Uday Kotak will be the chairman of the new company. Explaining the rationale behind the new venture, Chris Casciato, managing director, Goldman Sachs India LLC, said, "The new firm will give us much more freedom as there are technical restrictions on a representative office. We wanted to change the form of Goldman Sach's presence in India so that these restrictions do not apply."
The proposed new investment banking company, Goldman Sachs India, will focus primarily on cross-border business. It is currently working on the Indian Oil Corporation (IOC) GDR mandate.
Goldman will shortly be moving FIPB for a formal clearance. The capitalisation level of the new firm is yet to be finalised. Goldman has 25 per cent stakes in two Kotak companies - Kotak Mahindra Capital Company (KMCC) and Kotak Securities (KS). Kotak Mahindra Finance Ltd holds 75 per cent in KMCC while Uday Kotak holds 75 per cent in KS.
Uday Kotak, vice chairman, Kotak Mahindra Finance Ltd (KMFL), says, "I am very pleased to increase my involvement with Goldman Sachs. It will enable KMCC and Kotak Securities to continue building the investment banking business in India in conjunction with Goldman Sachs' global expertise."
Hank Paulson, co chairman and co-chief executive officer, Goldman Sachs, says, "We are delighted to extend our joint venture which, despite difficult market conditions in India, has been very successful. The formation of Goldman Sachs India demonstrates our commitment to the country. Having Uday as our chairman and as a significant shareholder in our company strengthens our alliance."
The strategic alliance entails co-operation and resource sharing between Goldman Sachs and the two Kotak companies over a wide range of Indian investment banking activities.
Uday Kotak will continue to remain chairman of both KMCC and KS. While the extension of the alliance comes into force immediately, the formation of the new firm will follow upon re-ceiving various regulatory approvals.
