Ketan Parekh
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Ketan Parekh was a Mumbai based stock broker. He hailed from a well-to-do Gujarati share trading family. He was involved in the shares scam of the year 2000-01 in the Indian Stock Market.
[edit] 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).
[1] 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. Also Mr Mehta's best friend Mr,Pravin Ruparel was involved with Ketan's Business in 1996.
Ketan’s modus operandi was to ramp up shares of select firms in collusion with the promoters. Interestingly, around the time when Ketan started taking long positions in his favorite K-10 scrips, 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 with money provided by these managements. In Ketan's 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..
[edit] Ketan's endgame
With the prices of selective shares constantly going up, due to his rigging, innocent investors who had bought such shares at high prices (thinking the market as genuine) lost heavily. Soon after discovery of this scam, the prices of these stocks came down to the fraction of the values at which they were bought. Even banks lost money heavily.
At the time, a group of traders, known as the Bear Cartel (Shankar Sharma, Anand Rathi, Nirmal Bang) existed which used to make money in falling stock prices. Bears sell stocks at high prices and buy back at low prices. Around February end in 2000, this cartel placed sell orders on the K-10 stocks and crushed their inflated prices. All of Ketan's borrowings too could not rescue his scrips. The Global Trust Bank and the Madhavpura Cooperative went bust when the money they had lent to Ketan sunk with his K-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 broker Ketan Parekh.
Ketan Parekh was arrested on December 2, 2002 in Kolkata.
