In the last two years, Lehman Brothers has invested around Rs 1,200 crore in stocks of various Indian companies as a foreign institutional investor (FII). Between 2005 and now, the investment bank had also invested some Rs 4,400 crore as private equity.
With its global losses mounting, within the past month the bank offloaded shares worth Rs 400 crore in several Indian companies, including Amtek Auto, Amtek India, Cranes Software International, NIIT Ltd, Northgate Technologies, Prajay Engineers Syndicate, Fedders Llyod, Masterk, and Triveni Engineering.
?The sell-off was a clear signal that the company was desperate to liquidate its assets and get whatever price it could at that point of time,? says a market analyst. The firm is also learnt to be looking for buyers for its real estate investment division. In fact, most of its private equity exposure was in the real estate sector, including in firms like Unitech, DLF Assets, Future Capital, DB Realty.
According to CMIE and other sources, Lehman Brothers? move to file for bankruptcy in New York on Monday wiped out more than Rs 2,000 crore from the market valuation of those Indian companies in which the US financial major had made investments through the stock markets. Agency reports say the bank recorded a loss of more than Rs 50 crore on Monday on its investments in India. Experts say if it had not offloaded its entire stake in these companies, losses on Indian exposure would have been much higher.
After filing for Chapter 11 bankruptcy proceedings, while Lehman Brothers? principal business of investment under its name in Indian stock markets will stop, it can still continue its agency business, that is, as a dealer and broker. The lucrative participatory notes business has already taken a hit, as clients have moved to other banks, mostly European.
Harish HV, a partner at Grant Thornton India, says the collapse of Lehman Brothers will have a significant impact on FIIs in India. The cascading effect on other FIIs would be a liquidation of some of their holdings into dollars. This means pressure on the rupee to depreciate will increase. ?There is a great possibility that Lehman Brothers will liquidate its equity holdings in Indian companies to prevent further losses. There is no problem in liquidating its stakes, but the bank will have difficulty getting a good price,? he said.
Daljeet S Kohli of Emkay Research echoed the same opinion. ?The impact would be felt on its existing stocks in some Indian companies as the firm will find it difficult to get a good price and buyers,? he says.