Thursday, June 4, 2009

Ketan Parekh is back

ketan parekh is back

Companies, when raising money from the stock market, rope in brokers to back them in raising the share price. ketan parekh formed a network of brokers from smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange, and used benami, or share purchases, in the name of poor people living in the shanty towns of Mumbai. Ketan rose to fame at the same time as the worldwide dot-com boom (1999-2000) and he relied primarily on the shares of ten companies for ketan parekhdealings (now known infamously as the K-10 scrips).

ketan parekh scam
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 a Rs 250 crore loan from Global Trust Bank, although Global Trust’s chairman Ramesh Gelli, who was later asked to resign, repeatedly asserted that the amount was less than Rs 100 crore, which was in keeping with the Reserve Bank of India's normal amount. Ketan and ketan parekhassociates obtained another Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank despite the fact that RBI regulations ruled that the maximum loan a broker could obtain was Rs 15 crore. In addition, Mr Mehta's was involved with Ketan's Business in 1996.

ketan parekh modus operandi was to ramp up the shares of select firms in collusion with promoters. Interestingly, around the time when ketan parekh started taking long positions in ketan parekhfavorite K-10 scrips, the Securities and Exchange Board of India (SEBI) concluded a 3-year old case against Harshad Mehta, who had colluded with the managements of BPL, Sterlite and Videocon to ramp up their shares.

In ketan parekh case, SEBI found prima facie evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.

With the prices of selective shares constantly going up due to ketan parekh rigging, innocent investors who had bought the shares at high prices, thinking the market as genuine, lost heavily. Soon after the discovery of the scam, the prices of these stocks came down to a fraction of the values at which they were bought, causing even banks to lose large sums of money.

At the time, a group of traders known as the "Bear Cartel" (Shankar Sharma, Anand Rathi, Nirmal Bang) were making money from falling stock prices. Bears sell stocks at high prices and buy back at low prices. Around February end in 2000, tketan parekhcartel placed sell orders on the K-10 stocks and crushed their inflated prices. All of Ketan's borrowings could not rescue ketan parekhscrips. The Global Trust Bank and the Madhavpura Cooperative went bust when the money they had lent to Ketan sunk with ketan parekhK-10 stocks.

The information furnished by the Reserve Bank of India to the Joint Parliamentary Committee (JPC) during the investigation of the scam revealed that financial institutions like 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 Ketan Parekh.

Ketan Parekh was arrested on December 2, 2002 in Kolkata.

related tags : ketan parekh ,ketan parekh scam, ketan parekh sebi


Post a Comment