KETAN PAREKH

WHO KETAN PEREKH IS ???

Who is He???
Ketan Parekh is a former stock broker from Mumbai,

who was convicted in 2008, for involvement in the Indian stock market manipulation scam in late 19992001.

Currently he has been debarred from trading in the

Indian stock exchanges till 2017.

Profile & Background of scam :

KP is C.A. by profession and used to manage NH Securities started by his father. Known for maintaining a low profile, was known as the 'Bombay Bull' and had connections with movie stars, politicians and even leading international entrepreneurs like Australian media tycoon Kerry Packer. (KPV Ventures, a $250 million venture capital fund that invested mainly in new economy companies. )

K- 10 (Global),
The companies in which KP Zee Telefilms, held stakes or K-10 stocks Crest Communications, included : PentaMedia Graphics Amitabh Bachchan Infosys. Corporation Limited Satyam Computers. (ABCL), Mukta Arts(Subhash Ghai), Pritish Nandy Communications HFCL, Global Telesystems

And the

Story begins

Although KP was a successful broker, he did not have the money to buy large stakes. According to a report, 12 lakh shares of Global in July 1999 would have cost KP around Rs 200 million. The stake in Infosys would have cost him Rs 50 million, While the Zee and HFCL stakes would have cost Rs 250 million each.

KP borrowed from various companies and banks for this purpose. His financing methods were fairly simple. He bought shares when they were trading at low prices and saw the prices go up in the bull market while continuously trading. When the price was high enough, he pledged the shares with banks as collateral for funds.

 A small Ahmedabad-based bank, Madhavapura Mercantile Cooperative Bank (MMCB) was KPs main ally in the scam. KP and his associate started tapping the MMCB for funds in early 2000. In December 2000, when KP faced liquidity problem in settlement he used MMCB in two different wayso First was the pay order route, where as KP issued cheques drawn on BoI to MMCB, again which MMCB issued pay orders, the pay order discounted at BoI. o The second route was borrowing from a MMCB branch at Mandvi (Mumbai) where different companies owned by KP and his associates had accounts. KP used 16 such accounts, either directly or through other broker firms, to obtained funds.

By Feb 2001, CSE were reduced to an estimated Rs 6-7 billion from their initial worth of Rs 12 billion KP's badla payments of Rs 5-6 billion were not honored on time for the settlement and about 70 CSE brokers, defaulted on their payments By mid-March, the value of stocks held by CSE brokers went down further to around Rs 2.5 - 3 billion

DEVELOPMENT LEADING TO KP SCAM

176 points fall in the sensex on march 1st, 2001 Prior day union budget tabled prompted 177 sensex points increase. SEBI launched immediate investigations SEBI inspected the books of several brokers suspected of triggering the crash RBI ordered some banks to furnish data of Capital market exposure BSE President Anand Rathis resignation added to continued downfall of sensex

-March, the value of stocks held by CSE brokers went down further to around Rs 2.5 billion. The CSE brokers started pressurizing KP for payments. KP again turned to MMCB to get loans. The outflow of funds from MMCB had increased considerably form January 2001. Also, while the earlier loans to KP were against proper collateral and with adequate documentation, it was alleged that this time KP was allowed to borrow without any security.

IMPLICATIONS
One of the biggest Fall in BSE -700 points KP and other traders were banned from trading for 17 years Short selling was banned for 6 months. Badla system was banned All shares that were put as collaterals should be done so through NSE and BSE. 10% additional deposit Margins.

Ketan Parekh was arrested by CBI on 30th March 2001.

RS. 2000 billion lost KP released on bail on May 2001 All Ketan Parekh had to say was I made mistakes The Retail investors were the worst hit SBI, BOI, PNB had to suffer huge losses MMCB also suffered huge losses

CONCLUSION