Lehman Brothers' legacy in Dalal Street

Institutional desks of many brokerages in India are in the process of selling about Rs 2,000 crore worth of equity holding of bankrupt US investment bank Lehman Brothers Inc in some Indian companies.

These 'Lehman blocks' emerged after the convertibles that the bank had bought during its heydays resulted in equity holdings.

Once among the world's leading investment banks, Lehman Brothers had filed for bankruptcy on September 15, 2008. Its demise triggered a global financial crisis, from which the western world has only just begun to emerge.

Dealers said large blocks of Lehman shares in companies such as Sarda Energy, Moser Baer, KPIT Cummins and Emkay Financial were recently sold and that they are scouting for buyers for quite a few other blocks.

"Lehman's stake in Sarda (Energy) has been sold only a couple of weeks back," said a person who was part of the sale process. "It was bought by two London-based foreign institutional investors," he said requesting anonymity. "The block was sold at Rs 172.4, while the shares (of Sarda Energy) on that day closed at Rs 212.35 (on the Bombay Stock Exchange)." 

Another institutional trader, who is familiar with the development, said Lehman's stake in KPIT Cummins was bought by that company's employees' trust while the work was on to secure buyers for its stake in Anant Raj Industries.

There are at least 15 listed entities in India where Lehman Brothers held sizeable stakes as on December 31, 2009, according to data collated by the Business Standard Research Bureau.

While the latest shareholding pattern is not available for most of these companies, two entities -- Emkay Global Financial Services and Moser Baer -- have filed their March quarter shareholding pattern that clearly shows that Lehman has exited the counters completely. In other words, the shares were sold between January and March. As on December 31, 2009, Lehman held 3.75 per cent stake in Emkay and 1.42 per cent stake in Moser Baer. In addition, Lehman's stake in Sarda Energy has also been sold off completely.

Incidentally, Lehman's position in the derivatives segment in India had expired at the end of September 2008, the month in which the bank filed for bankruptcy. Most of its cash positions were also squared off but there were still a lot of positions taken through convertible bonds. According to market players, most of the bonds have now been converted into equity and a liquidator is trying to get those shares off the books.

Some of the companies where Lehman held a sizeable stake as on December 31, 2009 include: KSK Energy Ventures (21.52 per cent), West Coast Paper (3.98 per cent), Orchid Chemicals & Pharma (2.93 per cent), Spice Mobiles (2.91 per cent) and Tulip Telecom (2.97 per cent).

Most of its cash positions were also squared off but there were still a lot of positions taken through convertible bonds. According to market players, most of the bonds have now been converted into equity and a liquidator is trying to get those shares off the books.

Some of the companies where Lehman held a sizeable stake as on December 31, 2009 include: KSK Energy Ventures (21.52 per cent), West Coast Paper (3.98 per cent), Orchid Chemicals & Pharma (2.93 per cent), Spice Mobiles (2.91 per cent) and Tulip Telecom (2.97 per cent).

Apart from these, Lehman held around two per cent in companies like Cox & Kings, Edelweiss Capital, Anant Raj Industries and Pioneer Embroideries. It held 7.73 per cent in Sarda Energy.

Some institutional traders tracking Lehman blocks said a US-based liquidator is handling the process of squaring off Lehman's positions wherever they still exist.

"Most of the positions have been created as Lehman bought convertible bonds in quite a few companies. After a period of time, these bonds get converted into shares, which are being sold now," said an institutional trader requesting anonymity, as he is not authorised to speak with media.  "The sale proceeds are credited to the custodian who is in touch with the liquidator."