Kotak Mahindra buys out Goldman Sachs in domestic JV's; Goldman to set up own operations
16 March 2006

Kotak Mahindra Bank will acquire the stake held by global investment bank Goldman Sachs in two financial services subsidiaries of the bank. Goldman Sachs held 25 per cent each of the subsidiaries, Kotak Mahindra Capital Company and Kotak Securities. After the stake acquisition by Kotak, these two companies will become wholly owned subsidiaries of the bank.

Kotak Mahindra is to pay Rs210 crore for the 25-per cent stake in Kotak Securities and Rs123 crore for the 25-per cent stake in Kotak Mahindra Capital Company.

The Kotak Mahindra group has also terminated the strategic alliance with Goldman Sachs. The two parties have entered into a business co-operation agreement for one year.

Goldman Sachs has separately announced that it would set up its own investment bank and stock brokerage in India.

The relationship between Goldman Sachs and Kotak group started in the early '90s. Goldman Sachs acquired stakes in the two companies in 1996.

Kotak Mahindra Capital Company is one of the leading investment banks in the country. The company also has operations in countries like US, the UK, the UAE and Mauritius through subsidiaries.

Kotak Securities is one of the largest stock brokerages, focusing on both the retail and institutional segment. The company has over 600 branches covering more than 200 locations across the country.

The valuations of Kotak Securities at Rs840 crore and Kotak Mahindra Capital at Rs492 crore for this transaction are considerably lower than the market capitalisation of similar companies. The lower price may be because of the fact that there is no non-compete agreement between the groups and Goldman Sachs is free to start operations immediately.

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