Click to play videoNew Delhi: Lehman Brothers Holdings Inc. (LBHI) bankruptcy and Merrill Lynch's acquisition by Bank of America will have a huge impact on India as both companies have a strong Indian connection.
Lehman Brothers currently employs about 2,500 people in India and most of them are likely to lose their jobs. Merrill Lynch also employs 600 people in India and their fate is not known.
The global investment bank's move to file bankruptcy has already lead to a loss of nearly Rs 2,000 crore for Indian companies in which Lehman had made equity investments.
The loss would have been higher if Lehman had not started offloading its equity holdings in Indian firms last month.
The impact of the collapse of Lehman Brothers is also likely to take a toll on ICICI Bank. The bank's UK arm has an exposure of $80 million to Lehman's debt exposure.
Brokerage Kotak Securities in a note to its clients has said it expects ICICI Bank to recover 50 per cent of the total debt. Though the exposure is not significant for a bank of the size of ICICI, but sentiment on the stock market has taken a huge beating on the news.
Following the subprime crisis in the United States of America, Foreign Institutional Investors have already pulled out over $8 billion from Indian markets.
Lehman Brothers also issued a press statement on Tuesday on its operations in Asia.
"Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Futures Asia Limited have suspended its operations with immediate effect. This includes ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice. Our asset management company, Lehman Brothers Asset Management Limited will continue to operate on a business as usual basis," the statement said.
Earlier, Lehman Brothers filed a petition under Chapter 11 of the US Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York.
None of the broker-dealer subsidiaries or other subsidiaries of LBHI was included in the Chapter 11 filing and all of the US registered broker-dealers will continue to operate.
The Board of Directors of LBHI authorised the filing of the Chapter 11 petition in order to protect its assets and maximise value.
The directors of certain UK companies including Lehman Brothers International (Europe), Lehman Brothers Holdings Plc, Lehman Brothers Limited and LB UK RE Holdings Limited have concluded that in the absence of ongoing financial support from the ultimate parent company, they are or are likely to become unable to pay their debts as they fall due and accordingly have taken steps to place those companies into administration, a press release by the company on Monday, said.
- Lehman Brothers is one of America’s oldest and biggest financial institutions
- Lehman went into subprime lending early for big returns
- Subprime is about giving home loans to borrowers with poor or no credit history
- Subprime lending attracts higher than normal repayments
- Lower interest rates boosted demand for homes and subprime loans
- Interest rates began to climb in 2004, peaked by 2006
- Many subprime mortage clients defaulted on loans
- Building rates and housing prices tumbled
- First signs of subprime crisis emerged in 2007
- Ownit Mortgage Solutions Inc was among first of the subprime lenders to collapse in 2006
- Wall Street banking firms stepped in with mortage related write offs worth $ 500 billion
- September 14, 2008: Barclays walks away from talks to buy Lehman
- US Treasury Secretary Hank Paulson refuses to commit taxpayers money
- September 15, 2008: Lehman files for bankruptcy, Merrill Lynch is sold to Bank of America.
However, Anil Dhirubhai Ambani Group (ADAG) Chairman Anil Ambani said the impact of the global credit crisis on India will be minimal.
"The impact on the overall economy is likely to be far more moderate thanks to the calibrated, cautious and conservative approach of our policy planners. Fortunately the biggest drivers of India's growth is still domestic consumption and investment isolating us further from the fall out of the global turmoil," Ambani said.
(For updates you can share with your friends, follow IBNLive on Facebook, Twitter, Google+ and Pinterest)
 |
 |
 |
|
More on IBNLive Right Now
MOST SHARED
PHOTOGALLERY
