Goldman’s India push bears fruit in crowded Wall Street field

It was at a rare global board meeting in New Delhi’s Taj Mahal Hotel that Goldman Sachs Group Inc.’s India country head made the case for change. Sonjoy Chatterjee told directors — including CEO David Solomon — that it was time to stop treating India as a future growth story. Inflation had stabilized, banks had reduced bad loans and corporate balance sheets were the strongest in decades. After some debate, Chatterjee won out. Goldman has now injected about $500 million into its India banking franchise over the last three years, demonstrating its commitment to the world’s fastest-growing developing economy, according to people familiar with the matter. For the Wall Street giant, which for years played on the fringes of Indian dealmaking, the dramatic shift is starting to bear fruit. Goldman vaulted to fourth in Indian equity offerings last year — after never ranking in the top five over the past decade — and finished fifth among banks in mergers, according to data compiled by Bloomberg. The firm overtook arch-rival Morgan Stanley in stock sales for the first time in a decade. The question now is whether the pivot can translate into lasting market share in one of the world’s most competitive investment-banking battlegrounds. JPMorgan Chase & Co. and Citigroup Inc. have built deeper, more entrenched franchises than Goldman, while domestic lenders such as Kotak Mahindra Bank Ltd. and Axis Bank Ltd. command deep client relationships and pricing power. Despite the competition, Goldman sees more growth ahead. The bank expects India’s IPO market to accelerate, and has at least 10 mandates in hand, according to Bloomberg data. Nearly 138 companies have already received regulatory approval for offerings, while about 68 more are awaiting clearance. Indian firms raised a record $22 billion last year, making it one of the world’s busiest IPO markets. The bank’s shift in India is reflected in its office location. For years, its banking team worked out of a squat, three-storey building in Mumbai’s fading textile mill district, better known for derelict warehouses than deal making. The building is now being torn down, its peeling walls a reminder of how cautiously the firm once viewed the market. Goldman’s India franchise now occupies two middle floors of a glass-and-steel tower in Mumbai’s Worli business district, after about 130 bankers, traders and private-credit staff moved in last August. The office is in addition to its tech hub in Bengaluru, which has employed thousands of workers for more than two decades. Goldman is now seeking to build scale across equity underwriting, mergers, private credit and structured finance, rather than relying on one stronghold to pull the franchise along. That means going head-to-head with entrenched rivals on fees and capital commitments, while accepting thinner margins in the near term to build a market presence. “You can’t approach India with a narrow, fee-driven investment-banking mindset,” Chatterjee said in an interview. “Relative to other markets, the standalone fee pool is smaller, which means success depends on viewing investment banking as an entry point into a larger suite of businesses.” When Chatterjee, who turns 58 this month, joined Goldman about 15 years ago from ICICI Bank Ltd., the firm was still struggling to turn a profit. Even as India’s deal market boomed, progress was slow. With fee-sensitive clients and rivals willing to accept razor-thin margins, particularly on state-linked transactions, it was hard to build relationships and climb rankings. Those dynamics left Goldman lagging behind rivals such as JPMorgan and Morgan Stanley, particularly in equity underwriting and domestic mergers. It often avoided fee-sensitive mandates, passed on government divestments and relied heavily on overseas relationships rather than building a broad local franchise. Goldman found itself on the sidelines of several marquee transactions, including IPOs by Hyundai Motor India Ltd. and Tata Capital Ltd. It also passed on multiple state sell-downs and lost out on stake 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 lower than China and Japan among Goldman’s Asian markets by revenue, but it’s now one of the fastest-growing businesses in the region, according to people familiar with the matter. The firm doesn’t break out its India revenue in filings. “Goldman’s push into India reflects long-term positioning around client relevance as the country’s capital markets deepen,” said Bloomberg Intelligence analyst Neil Sipes. “Its league-table rankings lag its global standing in M&A and equity underwriting, highlighting a gap Goldman may be looking to narrow by leaning on its global brand.” Unlike JPMorgan, Citigroup and Bank of America Corp., Goldman lacks a commercial-banking franchise in India, limiting its ability to deploy its balance sheet to win deals. Morgan Stanley faces a similar constraint. Still, Goldman helped sell more than $4 billion of stock last year across 23 transactions, including marquee mandates such as a $1.5 billion block in ITC Ltd. for British American Tobacco Plc, and advisory work on Tata Motors Ltd.’s acquisition of Iveco Group NV. Goldman is riding a capital markets boom underpinned by several structural changes. Since 2021, regulators have liberalized foreign-investment limits, streamlined IPO processes, accelerated merger approvals and broadened access to corporate debt for overseas investors. Domestic mutual funds are drawing several billion dollars a month, cushioning equity issuance even during market selloffs. Global banks are pressing their advantage, with Citigroup among those expecting another strong year for mergers in India and China. For Goldman and other banks, equity capital markets often function as the front door, leading to other deals ranging from credit and structured financing to mergers, recapitalizations and pre-IPO funding. “IPOs, follow-ons, and block trades are often where long-term client relationships begin, and where firms demonstrate their ability to support growth at scale,” Chatterjee said. The firm has also emerged as one of India’s most active private-credit players. A recent transaction included $600 million for Jubilant Bhartia Group to help finance its acquisition of a stake 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 is an important differentiator for us,” Chatterjee said. The firm plans to scale up foreign-exchange trading, allowing it to deal directly with companies, investors and financial institutions. Government-linked transactions are returning to focus, spanning privatizations and state-backed equity sales, including a mandate to sell shares in four state-run banks. Goldman has restructured leadership to support the push. It elevated Chatterjee’s role, gave longer runways to Devarajan Nambakam and Sudarshan Ramakrishnan as co-heads of investment banking, and hired Sunil Khaitan from Bank of America to lead equities and financing. Goldman promoted six managing directors in Mumbai last year, its largest MD class ever in India. Meanwhile, the firm’s technology center continues to grow to about 8,000 people, from 300 when it started as a back-office hub more than two decades ago. Goldman has more staff in India than anywhere outside the US. Away from dealmaking, Chatterjee stays close to his team. He joins colleagues for yoga sessions at the new Mumbai office. The intensity of the expansion, however, has left little time for his other passions as a drummer and boxer. “We may not always be the first mover, but when we see durable tailwinds forming across an economy — whether in growth, capital markets, or policy — we are prepared to commit fully,” Chatterjee said.