The 158-year-old Lehman Brothers’ move to file for bankruptcy today wiped off more than Rs 2,000 crore from the market valuation of those Indian companies in which the US financial major has made equity investments.
Major stocks held through participatory notes issued by Lehman Brothers Investment Management, a Sebi-registered foreign institutional investor, include West Coast Paper Mills (down 5.31 per cent), Edelweiss Capital (down 6.67 per cent), KPIT Cummins Infosystems (down 11.48 per cent), among others. Participatory notes are derivative instruments through which foreign investors that are not registered in India can trade on the Indian markets.
Lehman Brothers itself recorded a loss of more than Rs 50 crore today on its investments in India, nearly 10 per cent of its current holding worth over Rs 500 crore.
The loss would have been much higher if Lehman had not started offloading its equity holding in Indian companies late last month. In fact, these deals began some days ago, where Lehman Brothers Investment Management transferred large chunks of its holdings to sub-accounts managed by Deutsche Bank and JP Morgan.
In a major selling spree that started on August 21, Lehman sold shares worth close to Rs 400 crore in nearly 10 companies, including NIIT, Cranes Software, Amtek Auto, Amtek India, Fedders Lloyd, Northgate Technologies, Mastek, Triveni Engineering and Prajay Engineering, according to the bulk and block deal data available with the bourses.
Besides the 10 companies in which it has offloaded its shares, Lehman had equity holding in about two dozen firms at the end of the June quarter.
These firms include Spice Communications, Spice Mobile, Anant Raj Industries, Edelweiss Cap, IVRCL Infra, Tulip Telecom, Consolidated Construction, PSL, Orbit Corp, Development Credit Bank, Champagne Indage, Godawari Power, KPIT Cummins, West Coast Paper, IOL Netcom, Dhampur Sugar, Prithvi Info, Golden Tobacco, Emkay Global, Vijay Shanti Builders and Pioneer Embroidery.
Collectively, all the companies in which Lehman has invested had a market valuation of close to Rs 40,000 crore yesterday, which fell today by more than Rs 2,000 crore.
In addition to its equity holdings in listed companies, Lehman is also understood to have invested in various projects of Indian companies, especially in real estate.
In India, Lehman also acquired Brics Institutional Equities business of research analysts and sales and trading professionals and bought a 26 per cent stake in Edelweiss Capital Finance, a non-banking financial company, recently.
The investment banking major has also been involved in several Indian initial public offers.
Over the past year, its own share price has plummeted to nearly one-twentieth — falling from $82 to just $4 — in the midst of billions of dollars lost in the subprime crisis.
It may be recalled that a similar story had unfolded before Bear Stearns was taken over by JP Morgan as investors transferred their stock holdings in participatory notes. In fact, the sell-off continued long after Bear Stearns officially reached a deal with the US bank.
