Even as it is reportedly facing a US probe over its links with asset management giant Fidelity for sale of auction rate securities in the home market, Goldman Sachs is now looking to enter the primary dealerhip space in India. The world’s largest securities firm is looking to form its fourth wholly owned arm in India by investing Rs 215 crore(the minimum capitalisation norms for such NBFC activities is $50 million) to start primary dealership in government securities in the country.
It will join a host of firms who are registered primary dealers including ICICI Securities, Bank of Baroda, PNB Gilt, Corporation Bank, IDBI Cap, HDFC Bank, Canara Bank besides Kotak Mahindra, ABN Amro, JPMorgan Chase, Bank of America, Citibank, Deutsche Securities, Standard Chartered, HSBC and DSP Merrill Lynch.
A primary dealer is essentially a financial intermediary who deals with government securities. In 2006 primary dealers were allowed to manage risks in their business by diversifying into other business lines including corporate debt, money market, equity and securitisation instruments, subject to certain prudential limits. They were also allowed to offer certain fee-based services.
For Goldman this would be yet another venture in India. Since the time it sold off its stake in the two JVs with Kotak Mahindra Group(25% stake each in both Kotak Securities and Kotak Mahindra Capital) Goldman Sachs has been forming wholly owned entities to launch new business lines.
It started off by floating Goldman Sachs (India) Securities in 2006 to start merchant banking, stock broking and underwriting businesses. Last year it launched Goldman Sachs Asset Management for investment advisory, asset management and portfolio management services. Early this year it acquired a little known Mumbai-based NBFC, Pratham Investment & Trading to enter the corporate lending business. One of its other investment plans of picking 20% stake in Chennai-based NBFC, Shriram Credit Company did not materialise.
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