Bankers expect a wave of asset sales by cash-strapped Indian companies as the country's tycoons struggle to refinance their over-ambitious expansion plans.

India's banking system has practically ceased corporate lending after the collapse of Lehman Brothers, the American bank, according to analysts. Indeed, a recent report claimed that almost every leading retailer, property developer and airline in the country faced a cash crunch.

Many are looking to sell assets. One of the earliest signs that Indian companies were rethinking their strategies came in June, when Ranbaxy, the country's largest drugs maker, sold out to Daiichi, of Japan. The $4.6 billion (£3 billion) deal left many observers stunned - in recent years India's companies have bought, not sold - but since then, amid a dearth of lending and a stock market collapse, the pace of divestments has increased.

Tata, which is trying to refinance a $3 billion bridge loan taken out to buy Jaguar and Land Rover (JLR), recently sold stakes in two of its biggest cash cows. It raised £100 million from the sale of shares in Tata Consultancy Services, the IT outsourcing company. It is thought that the proceeds went to cover a rights issue launched to refinance the JLR deal but which fell flat when investors failed to take up the new shares on offer, forcing the underwriters to step in.

Then, days before Tata approached the British Government for a £1 billion bailout for the luxury car company, it sold a 26 per cent stake in Tata Teleservices, a mobile company that is arguably its most attractive asset, to NTT DoCoMo, the Japanese telecoms group, for $2.7 billion.

Saurabh Mukherjea, of Noble, the India-focused investment banking boutique, said: “We are still in the early days of the credit shock in India. We're going to see many more of this type of sale in 2009.”

Other would-be sellers include Vijay Mallya, whose Kingfisher airline has haemorrhaged cash. He is ready to sell a 25 per cent stake in the carrier to a foreign rival if he can get permission from the Indian Government.

It is also thought that he is looking to raise £500 million by selling 15 per cent of United Spirits, India's largest liquor producer, possibly to Diageo, the global drinks company. The proceeds are likely to be used to pay down United's debt of $1.2 billion, a hangover from the group's purchase of Whyte & Mackay, the Scottish distiller, in 2007.

After years of driving ultra-hard bargains, the credit crisis has led some Indian companies to cede control of key assets. Last month, Unitech Wireless, which holds a raft of potentially lucrative Indian mobile licences, sold a 60 per cent stake to Telenor, of Norway, for £870 million. Unitech, the parent real estate company, must repay £375 million in debt by March. Its shares have lost more than 90 per cent of their value this year.

Analysts say that India's liquidity crunch has been imported from London, where several large Indian companies set up treasury teams in recent years. Those teams borrowed at rates linked to Libor, the London interbank rate, which escalated sharply when the global credit crisis struck.

Hindalco Industries, a large aluminium group, recently failed to find takers for a rights issue to refinance its $5.7 billion acquisition of Novelis, a Canadian aluminium company. Hindalco eventually raised $1 billion at 3.15 per cent above Libor and intends to repay a $3 billion bridge loan by selling off its treasury holdings.

In India itself, domestic banks' reliance on large bulk deposits from big Indian companies has compounded the problem, starving smaller companies of credit. Those large corporate depositors are seeing the double-digit revenue growth figures of last year plunge to close to zero and are raiding their accounts for working capital, Mr Mukherjea said. “These deposits played a key role in financing banks' lending,” he said.

As the flow of London funding dries up, traders say that Indian companies have resorted to tapping domestic short-term debt markets, borrowing in rupees and converting the sums into dollars - a factor behind the rupee's steep decline. Meanwhile, foreign banks that had become active lenders in India rapidly scaled back activity after the collapse of Lehmans.

In October, a number of executives at foreign banks privately admitted that they had halted corporate lending in India. A senior investment banker in Bombay said: “It would be very difficult for a company even of the stature of Tata to borrow £1 billion today.”

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