Goldman Sachs is making a push to win more Indian equity capital markets deals, even if it means getting into low-paying deals that are difficult to execute.

In a rare move, the Department of Investment and Public Asset Management last week hired the American bank in a sole capacity to manage the government's stake sales in state-owned Central Bank of India, Indian Overseas Bank, Punjab and Sind Bank and UCO Bank, people with knowledge of the transactions said.  

An ECM source away from the deals said the bookrunner fee was low, although not as low as the Rs1 that some large deals from state-owned entities pay.

The four banks have to achieve a regulatory minimum free-float of 25% by August 2026, and the government intends to sell enough shares to reach the minimum requirement in stages. At the current price, shares totalling a maximum Rs289bn (US$3.3bn) have to be sold in the four banks to meet the free-float requirement.

Central Bank's current free-float is 11%, followed by UCO Bank at 9%, Punjab and Sind Bank at 6% and Indian Overseas Bank at 5%, according to LSEG data. 

The government is likely to sell the stakes through an offer for sale on local stock exchanges, though a final decision has not been taken. Alternatively, the stakes could also be reduced through qualified institutional placements, rights issues or follow-on offerings.

In addition to these deals, Goldman Sachs is part of a four-member syndicate to manage the government's sale of a 6.5% stake in Life Insurance Corp of India, worth up to US$4.2bn at the current share price, and is the sole bank hired for the government's planned share sale in Indian Railway Finance Corp to raise the free-float to 25% from 14%. At the current price, an IRFC sale would add up to around US$2.bn.

"A foolproof strategy to gain market share is by doing large state deals which others don't want to do. All banks, big or small, have done their share of 'national service' to bulk up," a Mumbai-based ECM banker said.

Illiquid quartet

Market participants said the four state-owned banks' share offerings will not be easy to sell as liquidity remains low and all of them are trading below the respective prices of their QIPs in March. In contrast, the Nifty PSU Bank Index is up 3.7% this year.

"In the past, state-owned banks and LIC would rescue such illiquid deals by buying in bulk," the ECM banker said. "Goldman Sachs' challenge will be to broaden the shareholder base and get both local and foreign institutions."

UCO Bank raised Rs20bn through a QIP of new shares priced at Rs34.27. Its shares ended at Rs28.19 on Thursday and are down 35% this year.

Central Bank of India raised Rs15bn through a QIP priced at Rs40.49, but its shares ended at Rs34.50 on Thursday and have lost 35% this year. 

Punjab and Sind Bank raised Rs12.5bn through a share sale priced at Rs38.37. Its shares ended at Rs27.66 on Thursday and have lost 43% this year. 

Indian Overseas Bank sold a Rs15bn QIP at Rs40.57. Its shares ended at Rs38.18 on Thursday and have slipped 26% this year.

BNP Paribas was the only foreign bank involved with any of the QIPs, working as a joint bookrunner on the Punjab and Sind deal.

Despite the lacklustre performance of these stocks, a financial sector analyst said institutional interest for the banking, financial services and insurance sector remains strong compared with other export-oriented industries which are likely to suffer because of the 50% tariff imposed on Indian exports to the US by the Trump administration.

Diversified portfolio

Goldman has been growing its business in India and in August inaugurated its new, expanded office space in Mumbai, which the bank said is 50% bigger than its previous location.

“Our new Mumbai office is the next chapter in our multi-decade growth trajectory in India, underscoring the substantial opportunities we see in the market," said Kevin Sneader, Goldman's president for Asia Pacific ex-Japan, in a statement.

In the past, Goldman mostly worked on larger and more high profile transactions but lately has been bidding for even mid-sized IPOs and QIP mandates. HDB Financial Services and JSW Cement are among the IPOs it has managed this year. Notable secondary market selldowns include those in InterGlobe Aviation, ITC, Vodafone Idea, One97 Communications, Biocon, Oberoi Realty, Lodha Developers, FSN E-Commerce Ventures and TBO Tek. In the QIP space it has managed the transactions of Aditya Birla Fashion & Retail and Azad Engineering. All of these companies are in the private sector.

HDB Financial Services' Rs125bn issue is India's largest IPO of the year so far and British American Tobacco's Rs129.3bn selldown in conglomerate ITC is the largest block of 2025.

This activity is reflected in its league table ranking. Goldman Sachs stood 11th in the Indian ECM league table in 2024 but has risen to sixth position as of August 27 this year with volume of US$2.7bn, according to LSEG data. 

The bank is working on IPOs for ICICI Prudential AMC (US$1bn), PhonePe (US$1bn–$2bn), Zepto (US$1.25bn),  Zetwerk (US$700m), Infra.Market (US$800m), PhysicsWallah (US$500m) and Urban Company (US$200m). 

Source: IFR