News: Goldman enters IDFC as ICICI exits

(TT 18/08/2006) Mumbai - Goldman Sachs has picked up little less than 4 per cent in Infrastructure Development Finance Company Ltd (IDFC) through a block deal in the secondary market when ICICI Bank sold its entire stake (4.20 crore shares) at a price of Rs 60 apiece. The transaction is worth Rs 252 crore.

This is the second major investment by the US-based investment banker in India in recent months. It had earlier acquired a 7 per cent stake in the National Commodity and Derivatives Exchange Ltd (NCDEX) at a price of Rs 507 per share for Rs 106 crore. In that case too, ICICI Bank was the seller.

In March, Goldman announced it would invest $1 billion in private equity, real estate and other businesses in India over the next two years.

The announcement came after it ended a 10-year relationship with the Kotak Mahindra group by selling a 25 per cent stake each in Kotak Mahindra Capital Company Ltd for Rs 210 crore and Kotak Mahindra Securities Ltd for Rs 123 crore.

Goldman then said it also plans to start its own investment banking, asset management and securities businesses.

In April 2004, Goldman launched its operations in Bangalore to provide support and services to the firm’s global businesses. It opened its Mumbai office in May to build a wholly owned onshore investment banking and securities firm in India. Apart from providing services, the firm drew up a strategy for India to include principal investing and asset management.

Goldman’s investment in NCDEX was seen as a reflection of its interest in the domestic commodities space where Fidelity International had picked up 9 per cent in Multi Commodity Exchange.

Observers said the investment banker had picked up the IDFC stake as it sees potential in infrastructure financing. Some of the other investors in IDFC include International Finance Corporation (IFC), Asian Development Bank, CDC Investment Holding Ltd, Morgan Stanley & Company and HSBC. The Union government is the single largest investor now in IDFC with over 23 per cent stake.

ICICI Bank has been selling some of its investments in the market to fund the robust demand for credit. Apart from the NCDEX stake, reports say the bank is planning to sell part of its holding in Asset Reconstruction Company (India) Ltd (Arcil) to Barclays. Earlier, the bank sold its holdings in Federal Bank and South Indian Bank to comply with Reserve Bank of India (RBI) regulations.