The Hindu Business Line : Lehman’s India exposure

BL Research Bureau Lehman Brothers’ bankruptcy filing in the US over the weekend will certainly have significant implications for the broader financial market and fund flows into India. But the fear that dumping of shares by the beleaguered Lehman group will now send the entire Indian market into a tailspin, may well be exaggerated. For one, the value of equity holdings held by the Lehman group in Indian stocks amounted to just Rs 1,030 crore as on June 30, 2008 (according to exchange data on shareholding patterns).

None of these holdings were in large or bluechip companies — KPIT Cummins, Mastek, Fedders Lloyd, Orbit Corp were the companies which featured the largest in Lehman stakes.

What is more, data on bulk deals put out by the exchanges reveals that Lehman and its associates already exited roughly 40 per cent of these holdings through sales put through over the past month, leaving only the remaining shares to be liquidated.

However, investors in stocks where the investment bank does hold stakes may have to brace for further erosion.

Staggered sales in Aug

Much similar to what Bear Stearns had done six months ago, Lehman too may want to cash-out on its Indian stock holdings to raise funds.

However, in stark contrast to how Bear Stearns had stunned Indian investors by selling securities worth Rs 265 crore in just a couple of days, the selling by Lehman and its subsidiaries has been more staggered.

Bulk deals data from the exchanges shows that Lehman (and its associates) have sold securities worth over Rs 395 crore via the bulk deals route in August.

Bulk deals are transactions that involve transfer of more than 0.5 per cent of the number of equity shares of any company listed on the stock exchange.

Some of the shares that were sold through bulk deals were Mastek, Triveni Engineering, Amtek India and Prajay Engineers.

It also needs to be mentioned that Lehman may also have sold shares in the market through transactions that didn’t satisfy the bulk deal criterion of the exchanges.

Worst may be over

The Rs.395-crore worth of sales would amount to roughly 40 per cent of the stakes held by the group in Indian stocks as of June.

Since some of the stocks that it held do not enjoy high liquidity and hence may not be saleable in chunks, it is also possible that some of the residual holdings may have already been disposed off in smaller lots. Share prices of companies such as KPIT Cummins, PSL, Orbit Corporation, Emkay Global, IVRCL Infrastructure and Development Credit Bank, in which Lehman has a considerable stock holding, have already been beaten down by the market in anticipation of a sell-out by the group.