HT This Day: Sept 16, 2008 — Lehman Bros files bankruptcy, 2,500 Indians may lose jobs
US Investment giant Lehman Brothers on Monday said it has gone bankrupt amid a worsening credit crisis in the home country, while rival Merrill Lynch, also bitten by the same bug, managed to find a buyer.
The news roiled markets worldwide, including India where the Bombay Stock Exchange’s Sensex plunged 850 points, or 6.1 per cent, in intra-day trading. It later recovered half-way to close at 13, 531 points.
But Lehman and Merrill Lynch’s India connection goes much beyond stock swings. Both companies have been rapidly expanding operations here, besides hiring aggressively in India to shore up talent for such key bases as New York and London.
Lehman currently employs about 2,500 people in India, most of whom run the risk of losing their jobs. Merrill has about 600 people here.
“We have not been told anything as yet, but everyone thinks it’s a matter of weeks before we are asked to pack up,” said a Mumbai based Lehman executive, who oversees back-office support for the company’s operations in Sydney and Tokyo.
Lehman’s decision to file for bankruptcy came after talks for either possible merger with British bank Barclays or a bailout from the US Federal Reserve failed during the weekend. Under US laws, a company filing for bankruptcy protection faces either reorganisation or liquidation. Liquidation will drive down share prices of the 18 companies, including Spice Telecom and Edelweiss Capital, where Lehman holds more than 1 per cent in equity.
The jolt comes just as easing crude prices and softening inflation were beginning to instill confidence in investors.