Lehman wipes off US$400 million in Valuation of Indian Companies

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Sept. 16 – The ballooning crisis in the U.S. financial market is expected to have more than just an indirect impact on India. The culmination of jittery FIIs spooking Indian markets, the sale of Merrill Lynch to Bank of America and Lehman Brothers filing for bankruptcy will affect a number of Indian companies.

What's more, if the trouble brewing in AIG turns into a crisis, it could spell worse news for India as AIG has a large array of interests in India ranging from the financial market to real estate.

Over the weekend the 158 year old international Investment bank filed for bankruptcy wiping off Rs 20 billion (US$400 million) from the market valuation of more than two dozen Indian companies in which the U.S. financial major holds equity investments, The Business Standard reported. The Sensex, the Bombay Stock Exchange 30-share index recovered from a 728-point dive to close 470 points down. The dollar crossed the Rs 46-mark, as the rupee fell for the sixth day in a row. Oil prices also tumbled to below US$93.

On its part, Lehman recorded a loss of more than Rs 500 million (US$11 million) crashing its investments in India, which totaled nearly 10 percent of its current holdings worth an estimated over Rs 5 billion (US$87 million).

Had the company not offloaded some of its holdings last month, the losses would have been higher. Prior to the sale the company had a portfolio of Rs 10 billion (US$200 million). The firm reportedly sold shares starting on August 21, worth close to Rs 400 crore (US$87 million) in nearly 10 companies, including NIIT, Cranes Software, Amtek Auto, Amtek India, Fedders Llyod, Northgate, Mastek, Triveni Engineering and Prajay Engineering.

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 percent), Edelweiss Capital (down 6.67 percent) and KPIT Cummins Infosystems (down 11.48 percent), among others. Participatory notes are derivative instruments through which foreign investors that are not registered in India can trade on the Indian markets.
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, valued approximately at US$ 1-1.5 billion.

Market regulators believe that although Lehman’s bankruptcy filing will certainly have significant implications for the broader financial market and fund flows into India, the fear of the entire Indian market heading into a tailspin may well be exaggerated.