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What Is In Store For Lehman In India?

15 September, 2008

Global investment bank Lehman Brothers has filed for bankruptcy under chapter 11. What does this man for the operations of the US bank in India?

VC Circle spoke to market sources to get the likely impact of these two events:

What Does Chapter 11 Mean For Lehman?

Lehman has filed for bankruptcy protection in the US courts under chapter 11, which means the company has claimed protection from bankruptcy and still can remain in business and avoid liquidation. This is different from chapter 7, where the bankruptcy trustee gathers and sells the debtor’s non-exempt assets and uses the proceeds of such assets to pay holders of claims (creditors).

Lehman To Wind Down Operations

Sources tell us that Lehman Brothers has to wind down their operations in Indian in any case. They will have to stop making principal investments in companies and also expsoure to stock markets.

Agency Business To Continue

Lehman’s agency business – essentially dealer and broking businesses – will continue in India. That is not part of the chapter 11 filing anyways.

P-Note Clients Moving To Other MNC Brokers

Sources indicate that a good 40% of the P-Note clients of Lehman Brothers have moved to other MNC brokers in India. The AA rated brokers like BNP Paribas Securities, Deutsche Bank Securities and Calyon (essentially all European brokers) are the beneficiaries as most of the Lehman P-Note clients who have moved have found refuge in the brokers.

What About People?

Lehman’s staff in India have already started looking out. So who is hiring? BNP Paribas, Nomura and Daiwa Securities are the only MNC investment banks who are hiring. So some of them may find jobs with these banks.

Besides, Lehman’s research and sales team in the broking division are said to be talking to a small Indian broking firm (which owes allegiance to a large industrial house in Mumbai).

What About Private Equity Division?   

Lehman has already put their real estate investment arm on the block. The firm’s investment team is said to be on the lookout for jobs.

What About Lehman-Backed IPOs?

One of the companies in which Lehman had invested,  Cellebrum Technologies, had filed for its IPO. Lehman held a 17% stake in VAS provider Cellebrum in which they had invested $15 million in 2005. Another one of its investments, KSK Energy Ventures, has just listed on Indian markets. Lehman has invested more than $75 million in KSK and hold about 28% stake.

 


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7 Comments
Abhinav . 6 years ago

I think the impact on employment is being underplayed. This will spell tough times for the jobs market in Financial Services and related industries.

Amit . 6 years ago

Lehman was reported to be investing $700 million in Unitech. Any news on where that stands?

Sidd . 6 years ago

Nothing will happen to the Unitech investment. All the money was paid to Unitech and the money was invested by Lehman RE Fund which has a 7-10 yr lock-in. So Unitech is ok for now…..

Rachit . 6 years ago

Lehman’s investment into Unitech was essentially a private equity investment into Unitech’s proposed Mumbai Unitech CBD, located at the Golibar village, Santacruz, W.E. Highway.

This one is a 140 Acre development and Lehman’s deal was linked with timelines spreading across a couple of years. I doubt if they would have made any considerable amount of immediate cash investments there. As I see it, Unitech might be the loser here !

babuds . 6 years ago

$700 m for development of 140 Acres in some lousy village called ‘Golibar/. No wonder they are cheated left and right (in India at least) and file bankruptcy. I think our MBAs from IIM’s who have been hired by Lehman since the pst several years have to be given due credit for its downfall!

Sourav . 6 years ago

Unitech would be a loser if the money being committed was Lehman’s prop money .. if its from a 3rd party managed fund then there should not be any problem due to Lehman filing Chapter 11.

SHAJID KHAN . 6 years ago

A Lehman-Backed Biotech Braves the Markets

There is a tiny shred of good news for Lehman Brothers: one of the investments of its Healthcare Venture Capital arm, a biotech company called Fluidigm, is set to go public this week.

Then again, that might not be such good news. It is the worst week the market has seen in years, in a year that has been difficult for start-ups that have gone public.

What Is In Store For Lehman In India?

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