Goldman’s India push pays off in crowded Wall Street field

(Bloomberg) — Goldman Sachs Group Inc.’s India country president floated the idea of ​​change at a rare global board meeting at the Taj Mahal Hotel in New Delhi.

Sonjoy Chatterjee told executives, including CEO David Solomon, that it was time to stop seeing India as a future growth story. Inflation had stabilized, banks reduced bad loans, and corporate balance sheets were at their strongest level in years.

After some debate, Chatterjee won. Goldman has demonstrated its commitment to the world’s fastest-growing emerging economy by injecting nearly $500 million into its banking franchise in India over the past three years, according to people familiar with the matter.

Dramatic change is starting to pay off for the Wall Street giant, which has been playing on the sidelines of Indian deals for years. After never being in the top five in the past decade, Goldman rose to fourth place in Indian equity offerings and ranked fifth among banks in mergers, according to data compiled by Bloomberg. The firm surpassed its arch-rival Morgan Stanley in share sales for the first time in a decade.

The question now is whether this pivot can translate into permanent market share in one of the world’s most competitive investment banking battlegrounds. JPMorgan Chase & Co. and Citigroup Inc. are building deeper, more robust franchises, according to Goldman, while Kotak Mahindra Bank Ltd. and Axis Bank Ltd. Domestic lenders such as have deep customer relationships and command pricing power.

Despite the competition, Goldman predicts more growth in the future. The bank expects India’s IPO market to accelerate and has at least 10 mandates in hand, according to Bloomberg data. Approximately 138 companies have already received regulatory approval for proposals, while approximately 68 more are awaiting approval. Indian firms raised a record $22 billion last year, making it one of the world’s busiest IPO markets.

The bank’s change in India is also reflected in its office location. For years, the banking team operated out of a squat, three-storey building in Mumbai’s fading textile mill district, better known for its abandoned warehouses than deal-making. The building is currently being demolished; The peeling of its walls is a reminder of how carefully the firm once looked at the market.

Goldman’s franchise in India now occupies the upper floors of a glass-and-steel tower in Mumbai’s Worli business district, following the move of about 130 bankers, traders and private credit staff last August. The office is in addition to the tech hub in Bengaluru, which has employed thousands of workers for over two decades.

Instead of relying on a single stronghold to keep the franchise going, Goldman is now looking to build scale across equity underwriting, mergers, private credit and structured finance. That means going head-to-head with established rivals on fees and capital commitments while accepting thinner margins in the near term to establish a presence in the market.

“You can’t approach India with a narrow, fee-focused investment banking mindset,” Chatterjee said in an interview. “Compared to other markets, the independent fee pool is smaller, which means success depends on viewing investment banking as an entry point into a larger business group.”

When Chatterjee, who turns 58 this month, joined Goldman from ICICI Bank Ltd. nearly 15 years ago, the firm was still struggling to turn a profit. Even as India’s deal market has grown rapidly, progress has been slow. Especially in government-related transactions, it was difficult to build relationships and rise through the ranks with fee-sensitive customers and competitors willing to accept razor-thin margins.

These dynamics have caused Goldman to lag behind rivals such as JPMorgan and Morgan Stanley, particularly in equity underwriting and domestic mergers. He mostly eschewed fee-sensitive powers, delegated government purges, and relied heavily on overseas relationships rather than building a broad domestic franchise.

Goldman describes itself as Hyundai Motor India Ltd. and Tata Capital Ltd.’s IPOs. It also sold off in multiple states and lost out on stock sales totaling more than $25 billion by units of billionaire Mukesh Ambani’s Reliance Industries Ltd.

The bank is now moving faster and competing harder than ever before. India ranks behind China and Japan among Goldman’s Asian markets in terms of revenue, but is now one of the fastest-growing businesses in the region, according to people familiar with the matter. The company does not disclose its India income in applications.

“Goldman’s move into India reflects long-term positioning around client interest as the country’s capital markets deepen,” said Bloomberg Intelligence analyst Neil Sipes. “League table rankings lag behind its global position in M&A and equity underwriting, highlighting a gap Goldman may want to narrow by relying on its global brand.”

Unlike JPMorgan, Citigroup and Bank of America Corp., Goldman does not have a commercial banking franchise in India, limiting its ability to use its balance sheet to win deals. Morgan Stanley faces a similar constraint.

Still, Goldman helped sell more than $4 billion in shares in 23 transactions last year, including major mandates such as a $1.5 billion block in ITC Ltd. for British American Tobacco Plc, HDB Financial Services Ltd.’s initial public offering and advisory work on Tata Motors Ltd.’s acquisition of Iveco Group NV.

Goldman is experiencing an upswing in capital markets, fueled by several structural changes. Since 2021, regulators have liberalized foreign investment limits, streamlined IPO processes, accelerated merger approvals and expanded access to corporate debt for overseas investors. Domestic investment funds attract several billion dollars a month, which prevents the issuance of shares even during market sell-offs. Global banks maintain their advantage, with Citigroup among those expecting another strong year for mergers in India and China.

For Goldman and other banks, equity markets often serve as the front door, leading to deals ranging from loans and structured financing to mergers, recapitalizations and pre-IPO financing.

“IPOs, follow-ons and block trades are often where long-term customer relationships begin and where firms demonstrate their ability to support growth at scale,” Chatterjee said.

The firm has also become one of India’s most active private lending players. A recent transaction involved $600 million to help Jubilant Bhartia Group finance its stake acquisition in Hindustan Coca-Cola Beverages. Goldman’s alternatives business has invested more than $8.5 billion in India since 2006, across asset classes including private equity.

“Private credit has been and continues to be a key differentiator for us,” Chatterjee said.

The firm plans to expand its foreign exchange business, which will allow it to do business directly with companies, investors and financial institutions. State-linked transactions are shifting back into focus to include privatizations and state-backed share sales, including the authority to sell shares in four state-owned banks.

Goldman restructured leadership to support this effort. He elevated Chatterjee’s role, gave Devarajan Nambakam and Sudarshan Ramakrishnan longer runs as co-heads of investment banking and hired Sunil Khaitan from Bank of America to lead equity capital markets and financing. Goldman promoted six managing directors in Mumbai last year; this was the largest ever medical class class in India.

Meanwhile, the firm’s technology center continues to grow, from 300 people when it was founded as a back-office hub more than two decades ago to nearly 8,000 people. Goldman has more staff in India than outside the US.

Far from making deals, Chatterjee remains close to his team. She joins colleagues for yoga sessions in her new Mumbai office. But the intensity of expansion left little time for his other passions as a drummer and boxer.

“We may not always be the first movers, but when we see persistent headwinds building in an economy, whether in growth, capital markets, or politics, we are ready to fully commit,” Chatterjee said.

—With help from Rajesh Mascarenhas and Manuel Baigorri.