Ketan Parekh
Ketan Parekh is a Mumbai based share and stock broker. He is from a well to do share-brokerage based family. He was involved in the shares scam of the year 2000/01.
Modus Operandi
Companies when raising money from the stock market rope in brokers to back them in raising the share price. Ketan formed a network of brokers from smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange. Ketan also used benami or share purchase in the name of poor people living in the shanty towns of Mumbai. Ketan's rise to fame occurred at the same time as the worldwide dot-com boom (1999-2000) and he relied primarily on the shares of ten companies for his dealings (now known infamously as the K-10 scrips).
Ketan had large borrowings from Global Trust Bank, whose shares he was ramping up (so that he could get a good deal at the time of its merger with UTI Bank) – he got Rs 250 crore loan from Global Trust Bank, though Global Trust’s chairman Ramesh Gelli (who was later asked to quit) repeatedly said that lending to Ketan was less than Rs 100 crore in keeping with Reserve Bank of India norms. Ketan and his associates got another Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank despite the fact that RBI regulations ruled that the maximum a broker could have got as a loan was Rs 15 crore.
Thus, Ketan’s modus operandi was clearly to ramp up shares of select firms in collusion with the promoters – ironically, during the Ketan clean up, SEBI concluded a 3-year old case where Harshad Mehta colluded with the managements of BPL, Sterlite and Videocon to ramp up their shares with money provided by these managements – and to get funding from them to do this. In the current Ketan case, SEBI has found prima facie evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.
Ketan's endgame
Now with the prices of select shares constantly going up,thanks largely to this rigging,innocent investors who bought such shares thinking the market as genuine,were at loss. Soon after discovery of this scam,the prices of these stocks came down to the fraction of the values at which they were bought.
The scam burst and the rigged shares came down so heavily that quite a few people in India lost their savings. Some banks including Bank of India lost money heavily.
At this time a group of traders (known as the bear cartel-Shankar Sharma, Anand Rathi, Nirmal Bang) relied on the global meltdown of stocks to make their profits. Bears sell stocks at high prices and buyback at low prices. At the time of the year 2000 Financial Budget this cartel placed sell orders on the K-10 stocks and crushed their inflated prices. All the borrowing of Ketan’s could not rescue his scrips. The Global Trust Bank and the Madhavpura Cooperative went bust because the money they had lent to Ketan had sunk with his K-10 stocks..
The information which was furnished by the Reserve Bank of India to the Joint Parliamentary Committee (JPC),during the investigation of the scam revealed that Financial institutions Industrial Development Bank of India (IDBI Bank) and Industrial Finance Corporation of India (IFCI) had extended loans of Rs 1,400-odd crore to companies known to be close to broker Ketan Parekh.
Ketan Parekh was later arrested on December-2,2002 in kolkata.
Ketan Parekh is a Mumbai based share and stock broker. He is from a well to do share-brokerage based family. He was involved in the shares scam of the year 2000/01.
Modus Operandi
Companies when raising money from the stock market rope in brokers to back them in raising the share price. Ketan formed a network of brokers from smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange. Ketan also used benami or share purchase in the name of poor people living in the shanty towns of Mumbai. Ketan's rise to fame occurred at the same time as the worldwide dot-com boom (1999-2000) and he relied primarily on the shares of ten companies for his dealings (now known infamously as the K-10 scrips).
Ketan had large borrowings from Global Trust Bank, whose shares he was ramping up (so that he could get a good deal at the time of its merger with UTI Bank) – he got Rs 250 crore loan from Global Trust Bank, though Global Trust’s chairman Ramesh Gelli (who was later asked to quit) repeatedly said that lending to Ketan was less than Rs 100 crore in keeping with Reserve Bank of India norms. Ketan and his associates got another Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank despite the fact that RBI regulations ruled that the maximum a broker could have got as a loan was Rs 15 crore.
Thus, Ketan’s modus operandi was clearly to ramp up shares of select firms in collusion with the promoters – ironically, during the Ketan clean up, SEBI concluded a 3-year old case where Harshad Mehta colluded with the managements of BPL, Sterlite and Videocon to ramp up their shares with money provided by these managements – and to get funding from them to do this. In the current Ketan case, SEBI has found prima facie evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.
Ketan's endgame
Now with the prices of select shares constantly going up,thanks largely to this rigging,innocent investors who bought such shares thinking the market as genuine,were at loss. Soon after discovery of this scam,the prices of these stocks came down to the fraction of the values at which they were bought.
The scam burst and the rigged shares came down so heavily that quite a few people in India lost their savings. Some banks including Bank of India lost money heavily.
At this time a group of traders (known as the bear cartel-Shankar Sharma, Anand Rathi, Nirmal Bang) relied on the global meltdown of stocks to make their profits. Bears sell stocks at high prices and buyback at low prices. At the time of the year 2000 Financial Budget this cartel placed sell orders on the K-10 stocks and crushed their inflated prices. All the borrowing of Ketan’s could not rescue his scrips. The Global Trust Bank and the Madhavpura Cooperative went bust because the money they had lent to Ketan had sunk with his K-10 stocks..
The information which was furnished by the Reserve Bank of India to the Joint Parliamentary Committee (JPC),during the investigation of the scam revealed that Financial institutions Industrial Development Bank of India (IDBI Bank) and Industrial Finance Corporation of India (IFCI) had extended loans of Rs 1,400-odd crore to companies known to be close to broker Ketan Parekh.
Ketan Parekh was later arrested on December-2,2002 in kolkata.
