Ketan Parekh (KP) is a former Mumbai-based stockbroker who is infamous for orchestrating the Indian stock market manipulation scam that occurred between 1998 and 2001; This later came to be known as the Ketan Parekh scam. He is a disciple of Harshad Mehta who orchestrated the securities scam of 1992. Ketan was popularly called the ‘Pentafour Bull’ of the Indian stock market.
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Family and early years
Ketan Parekh was born in 1963 (age 59 years; as of 2021) into an affluent upper-middle-class family of CAs and stockbrokers. His father Vinaychandra N Parekh introduced him to the changing world of the stock market. After becoming a Chartered Accountant, KP started his career in a reputed institutional brokerage firm named Narbheram Harkchand Securities (NH Securities). His wife’s name is Mamta Parekh and the couple has two daughters. It is rumored that his family (wife and two daughters) moved to London for the treatment of his daughter, who has been suffering from post-viral encephalitis since she was one and a half months old.
Involvement in Harshad Mehta scam
In the early 90s, Ketan came in contact with Harshad Mehta and joined Harshad’s brokerage firm Gromore. Under his tutelage, KP learned the methodology of the Mehta Brothers (Harshad and Ashwin). Although Ketan got into trouble after the Harshad Mehta scam, his role in the 1992 scam came under scrutiny when his own scam came to light in 2001. Subsequently, he was convicted for siphoning off Rs 48 crore from a Canara entity in 2008. Sentenced to one year imprisonment in the 1992 bank scam. In an interview given to NDTV, Ketan Parekh said,
What we have done is just a transaction. We have received the money from the Mutual Fund and have duly delivered the shares and the shares have been duly registered. Apart from this, we had no role of any kind in this transaction.”
working style
The Pied Piper of Dalal Street was famous for its Midas touch in the late 90s. Like his mentor, his business practices were unorthodox, but unlike Mr. Mehta, he did not use public money to manipulate stock prices. Promoters of various companies provided capital to Ketan to manipulate their stock prices. Allegedly, he also used his contacts at Global Trust Bank and Madhavpura Mercantile Co-operative Bank to access funds and illegally inflate the prices of various shares. He used to raise huge amounts of money through online trading and then manipulate the prices without anyone knowing. Ketan once manipulated the shares of VisualSoft and the share price of this company increased from Rs 625 to Rs 8,448 per share. He did the same with Zee Telefilms and the share price increased from Rs 30 to Rs 720 per share.
Sudden increase in share awards of Zee Entertainment in 2000
To realize the profits, Mr Parekh used financial institutions like UTI to dump the inflated stocks. In return, Ketan was rumored to have received huge bribes in the form of equity from such companies. He became known as the ‘Pentafour Bull’ and ‘One Man Army’ for his aggressive style of investing. An anonymous stockbroker in a media interaction with India Today said,
He may be down to earth, but he is very smart and cunning. He is very aggressive and is known for his fast moves. KP stock went up like a rocket – there was no gradual increase. If he decides to bring down any stock, he will do so immediately.
K-10 Stocks
At the peak of his reign on the stock market, Ketan had selected his 10 favorite stocks, which included Zee Telefilms, HFCL, Silverline, Satyam Computers, Aftech Infosys, DSQ Software, Ranbaxy, Pentamedia Graphics, Sonata Software and Visual Soft. , This set of 10 stocks was euphemistically called “K-10” stocks by other stockbrokers. Ketan, being an astute investor, was well aware of the IT boom of the late 90s, so he invested heavily in software and other tech-related companies.
Ketan Parekh’s share prices fall after market crash
their millennium bash
Although Ketan acquired a glittering image after throwing a lavish party known as the Millennium Bash in 2000, he was a shy and soft-spoken stockbroker who kept a low profile, lived a simple life and kept his distance from media interactions. Used to maintain. Before this happens. This made it difficult for people to believe his involvement in the scam. Even Sucheta Dalal (the journalist who exposed the Harshad Mehta scam) was quoted in her 2003 article in Rediff,
When I met him sometime in July 2000, I also got the impression that his feet were too much on the ground to follow Harshad’s path. Actually, till August 25 [2000]When the market showed the first signs of crisis, most newspapers did not even have a photo of the broker.
However, things changed after her famous Millennium Bash (New Year, 2000) at her lavish seaside bungalow in Mandwa on the coast of Bombay. The party was filled with high-end businessmen, fund managers and the glitz of Bollywood. Guests first gathered for a champagne reception at the Taj Mahal Hotel’s Sea Lounge restaurant, and were then taken in a high-security boat ride to their bungalow. The party was covered on the front pages of many tabloids. Subsequently, Ketan bought a fleet of luxury cars including a Cadillac and a Lexus (exactly like the one owned by Harshad). He was praised by a long list of celebrities, from Bollywood superstars including Amitabh Bachchan to global giants like Kerry Packer. Reportedly, KP became a good friend of Mr. Bachchan when he turned Amitabh Bachchan Corporation Limited (a failing company) into a profitable company. Later, Mr. Parekh started being featured on the front pages of business newspapers stating his views on the Union Budget and other finance-related topics. Newspapers also reported that Ketan was forming a joint venture with Indian businessman Vinay Maloo and Australian mogul Kerry Packer.
Ketan Parekh with Vinay Maloo and Kerry Packer
expose their scam
In the late 90s, the world economy was going through difficult times. Excessive speculation by Internet-based trading companies led to a massive market collapse in 2001, often referred to as the dot-com bubble. KP was also caught in a tech bubble along with the rest of the world. On 1 March 2001, two days after the Union Budget was passed, the BSE Sensex fell 176 points, prompting the then NDA government to investigate the market crash. Being a major player in the stock market, KP’s transactions were under heavy scrutiny. The RBI found his salary orders, which he had given as collateral for bank loans, suspicious; Investigation started against Mr. Parekh. At the same time, a payment crisis arose from the Kolkata-based beer cartel, which sold its shares of K-10 stock. KP and other brokers who held shares in their names sold a large portion of their K-10 shares after regular trading hours at the Calcutta Stock Exchange. Due to this the Sensex fell further by 149 points.
Stock market fell due to Ketan Parekh scam
Result
Due to this scam, the wealth of Ketan and his followers declined drastically and they became bankrupt. According to a report by SFIO (Serious Fraud Investigation Office), the estimate of this scam was between Rs 30,000-40,000 crore. The CBI arrested Ketan on 30 March 2001 on charges of defrauding the Bank of India of Rs 137 crore and detained him for 53 days. Due to this scam, SEBI had to remove the flaws in the system. The one-week trading cycle was reduced to one day. The operators were banned from carrying on the business. Brokers lost control over various stock exchanges.
Ketan Parekh has been arrested by CBI
trial and punishment
A Joint Parliamentary Committee (of 30 members) was formed to investigate the role of Ketan Parekh in the 2001 financial scam. The committee found Mr. Parekh guilty of circular trading. Another report by the Intelligence Bureau revealed KP’s involvement in manipulation of share prices of Dewan Housing Finance, Goenka Diamond, Orchid Chemical, IVRCL, GMR Infra, Pantaloon Retail, TBZ IPO, KS Oils etc. Following this, Ketan was banned from stock trading until 2017. To illegally manipulate the stock market. The Economic Times reports that Ketan was sentenced to two years’ imprisonment for fraud by a special CBI court in March 2014. In 2018, a fast track court had sentenced him to three years’ imprisonment for violating the SEBI Act. Later, the Bombay High Court suspended his sentence and granted him bail.
Ketan Parekh was sentenced to two years imprisonment
Ketan Parekh show is still going on
Even though KP has said on record that he has maintained his distance from the stock market, a SEBI report in 2009 alleged that Ketan was still active in the stock market with the help of several stockbrokers who traded on his behalf. . This resulted in SEBI banning 26 firms for violating the SEBI Act.
Categories: Biography
Source: vcmp.edu.vn