The global credit turmoil may have singed Goldman Sachs and Merrill Lynch, but the two leading investment banks are betting big on India.
While Goldman’s losses in the sub-prime crisis are pegged at $3.8 billion, Merrill has announced $51.8 billion write-downs till now.
Goldman will have an operational credit desk in India by the year- end and Merrill is in the process of increasing the headcount for its credit debt/mezzanine transactions in India.
A source in Goldman who did not want to be identified said the investment bank is now broadening its platform in India and extending the services as a part of its long-term plan in the country. “We are putting all the necessary components in place for our non-banking financial company and the Indian credit desk will be operational by this year end,” the source said.
Goldman, which parted ways with the Kotak Mahindra group in 2006, had announced ambitious India plans in March this year. The focus of the India team will be on institutional sales, which means that Goldman will sell risks to the large lending institutions in India.
Though the sources refused to give details on the structure and the head count for the India credit desk, they said Goldman would look at relatively smaller deal sizes of $50-70 million in the domestic market.
Goldman recently announced a joint investment with the US- based private equity investor Wilbur Ross in the Delhi-based low cost carrier SpiceJet earlier this month. Goldman’s share was $20 million. Its other investments include the tower arm of Bharti Airtel and the National Stock Exchange.
On its part, Merrill is increasing the head count for its credit debt/mezzanine transactions for the entire Asia Pacific region, including India. “We have doubled the head count in the Apac region over the past few months to increase business access and India is impacted by the move,” said a company source.
Merrill will also be looking at developing a team in Singapore specifically for the Indian transactions.
Banking analysts said the Indian market fundamentals are still quite good and global investment banks consider their investments in India as not only safe, but also lucrative in terms of returns.
In 2005, Merrill had paid about $500 million to boost its 40 per cent stake in its joint venture with DSP to 90 per cent as international banks seek to expand in the fast-growing market.
Merrill Lynch’s relationship with DSP began in the 1980s and grew into a joint venture in 1995. The business continues to operate under the DSP Merrill Lynch name.
