Lehman Brothers’ afterlife in India

Mumbai: More than six years after Lehman Brothers Holdings Inc. collapsed, succumbing to the subprime mortgage crisis it helped fuel, the remnants of the former US bank’s investments in India continue to endure.

Lehman owns shares in KSK Energy Ventures Ltd, an investment that is now valued at ₹ 110 crore.

Two Lehman Brothers funds—LB Mauritius III Ltd and LB Mauritius IV Ltd—collectively hold 6.24% in KSK Energy, a Hyderabad-based company engaged in thermal, hydro and solar power projects, according to data compiled by Capitaline, a corporate database. KSK shares ended trading on Thursday at ₹ 41.50, valuing Lehman’s stake in the Indian company at nearly ₹ 110 crore.

KSK Energy could not be immediately reached for further details on the stake held by the two funds and whether any attempts have been made to sell the shares. According to KSK Energy’s 2011 fillings to stock exchanges, the funds partly sold their stake when the Indian company had made an open offer. Thereafter, nothing has been disclosed publicly.

Lehman Brothers Securities Pvt. Ltd, the Indian brokerage unit of the US bank whose bankruptcy filing also marked the beginning of a global financial meltdown, on Wednesday surrendered its membership of the National Stock Exchange of India Ltd.

After Lehman Brothers filed for bankruptcy protection, a US government-appointed liquidator supervised the sale of all its assets.

According to market participants, large chunks of shares held by Lehman—popularly called Lehman blocks—were sold to various institutional investors in 2009 and 2010. Japan’s Nomura Holdings acquired Lehman’s Asian assets, but it’s not clear if the two funds mentioned above are held by the liquidator or Nomura.

At the time of its bankruptcy in 2008, Lehman Brothers held stakes in various Indian companies.

They include Sarda Energy and Minerals Ltd, Moser Baer India Ltd, KPIT Technologies Ltd, Emkay Global Financial Services Ltd, West Coast Paper Mills Ltd, Orchid Chemicals and Pharmaceuticals Ltd, Spice Mobility Ltd, Tulip Telecom Ltd, Cox and Kings Ltd, Edelweiss Financial Services Ltd, Anant Raj Ltd and Pioneer Embroideries Ltd.

Barring KSK, all Lehman holdings have been sold. While the bulk of its positions in the derivatives segment expired in September 2008 itself—the month it filed for bankruptcy—the firm held convertible bonds in many Indian companies, which later got converted into equity shares.

“Before the bankruptcy, Lehman had a big ‘convertible’ desk in India. It was among its largest desk along with that of proprietary trading. The equity shares were a result of the convertible instruments that were bought much before it went bust. For some time, the liquidator was in touch through the custodian but as time passed, active interest was lost,” said a person who helped sell some of the Lehman blocks. He did not want to be identified as he is not authorized to speak to reporters.

Capitaline data shows that Lehman shares in Moser Baer, Emkay Global, West Coast Paper, Orchid Chemicals, Spice Mobility and Pioneer Embroideries were all sold by December 2009. The stake held in these companies ranged between 1% and 4%. The stakes held in some of the other companies were sold in 2010.

Institutional dealers who managed the sale of some of these blocks said that mostly European funds bought Lehman’s shares. In one particular instance, a company’s employee trust bought out the nearly 4% stake held by Lehman Brothers.

Meanwhile, according to an NSE circular issued on Wednesday, the broking entity last traded on 24 September 2008. It had applied for the surrender of its membership in April 2013, according to a Press Trust of India report dated 15 April 2013.

Lehman was the fourth-largest investment bank in the US after Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch when it declared bankruptcy in 2008.

It was also one of the biggest investment banks to collapse since 1990, when Drexel Burnham Lambert filed for bankruptcy protection amid a collapse in the junk bond market.