News: 'Goldman eyes Indian commodity bourse stake'

(RTR 29/06/2006) Mumbai - Investment bank Goldman Sachs is close to buying up to 10 percent in an Indian commodity exchange in probably its biggest deal after it decided to go alone in India, a source involved in the talks said on Thursday.

Goldman, which said in March it aimed to invest $1 billion in private equity over the next two years in India, is likely to buy the stake from one of the shareholders in National Commodity & Derivatives Exchange (NCDEX), he said.

There will be no fresh issue of shares by the unlisted exchange, where about 48 commodities including coffee, palm oil, gold and silver are traded.

"The negotiations are in an advanced stage, I would not be surprised if a formal announcement of the deal comes out in the next 48 hours," the source said. "ICICI would be selling between 5-10 percent."

ICICI Bank Ltd., India's second-largest lender, which is under pressure from rising cost of funds could get about 1 billion rupees ($22 million) from the sale, he said. The bank holds about 15 percent in the unlisted commodity exchange.

An ICICI spokesman declined comment, while Goldman Sachs could not be immediately reached.

Commodities trading in India has been booming after India eased controls in April 2003 and launched derivatives.

FUNDS BUY

In January, Fidelity Funds-India Focus Funds bought a 9 percent stake in NCDEX's rival, Multi Commodity Exchange of India Ltd., for 2.16 billion rupees ($47 million), valuing the bourse at about $518 million.

NCDEX is unlikely to get such a valuation, the source said.

"At that time, the market situation was different from what it is now," he said, citing a global meltdown in commodities and stocks.

"Moreover, Goldman is going to be a strategic investor, and not a financial investor," the source said. "Goldman is in commodities, what Citibank is in banking."

Goldman ended a more than decade long partnership with India's Kotak Mahindra group in March, selling its 25 percent stake in both merchant banking and broking ventures to Kotak Mahindra Bank for $74 million.

The U.S. investment bank said it wanted to pursue opportunities in India on its own.

Other big shareholders in NCDEX include, India's National Stock Exchange, state-run Punjab National Bank, unlisted National Bank for Agriculture and Rural Development and government-owned Life Insurance Corp. of India.

The total value of trading on India's 24 commodity exchanges jumped to 13.8 trillion rupees in the nine months ended Dec. 31, 2005, from 5.71 trillion in the financial year ended March 2005, according Forward Markets Commission.

CASHING IN

ICICI Bank has sold investments at a profit over the past year, boosting its earnings at a time when rising interest rates are putting pressure on profits.

In March, it sold 8.4 percent of Mysore Cements Ltd. for 350 million rupees to a clutch of mutual funds. It had earlier sold stakes in South Indian Bank and Federal Bank.

"When the going is good just capitalise on the investments," said Arun Kejriwal, strategist at research firm KRIS. "If they manage to get about 15 billion rupees this year through this route, that would be good enough to show decent earnings growth."

ICICI and its units hold stakes in companies worth 50 billion rupees.

Shares in ICICI, which have slid about 15 percent so far this year against a 9.5 percent rise in the benchmark BSE index, were trading up 1.9 percent at 498 rupees in the afternoon.