In the long history of stock marketing in India, one scam that shook SEBI and other investors was the Ketan Parekh Scam. He had executed the scam with so much planning and thought that he made multiple folds of money through the stocks he manipulated. For many years, investors thought of Ketan Parekh as ‘Midas’ who would create profits for everything he touched. But within 2 years of his presence in the stock market, he deceived so many investors and banks that even today, his work and planning is a case study in universities and among upcoming investors.
He was infamously known as the Bombay Bull in the last decade of the previous century. Ketan Parekh was a mentee of Harshad Mehta, famous for pulling off the 1992 Securities Scam. By profession, Ketan Parekh was a Chartered Accountant and he started working in the 1980s where he ran his family business NH Securities. It was a stockbroking firm that was established by his father. Through his work experience here, he managed to understand all the tricks and tips of stock investing and also how the minds of investors worked in this process.
While he was at his peak, Ketan Parekh would manipulate the stock prices so much that he gained immense trust from other fellow investors. Through this growth financially, he earned a lot of connections within the Bollywood fraternity as well as in political circles. Along with Kerry Packer, a multi-millionaire entrepreneur from Australia, he founded the KPV Venture with a fund cap of $250 million to invest in new and exciting startups.
Ketan Parekh Scam
Studying his style of investing, it was fairly clear that Ketan was interested in the Information, Communication, and Entertainment Sector. During his peak years, from 1990 to 2000 was also the time when the dot-com boom started that brought a lot of money into these sectors. Many of the top businessmen and companies during this period gave money to Ketan to handle, given his accurate predictions and sharp knowledge of the market.
Ketan began trading in the Kolkata Stock Exchange, mainly because it did not have strong rules and enforcement like the BSE or the NSE. He also collaborated with a lot of brokers and gave them a commission for helping with information and trades. With so much money in his hand, he would purchase equity in small, not-so-well-known companies and their stock prices would hit the peak. Suddenly, these companies would be discussed a lot. Once the price hit a level, he would sell out and make a lot of profits.
He also had his tricks to obtain money from the banks and move the stock prices as a result. A well-known example is when he bought the shares of the Madhavpura Mercantile Commercial Bank so that he could win the confidence of the bank and later he approached them for a loan in the Pay Order format.
Pay Order works similar to cheques but it is issued by the bank when the customer pays a small advance amount to the bank. When he successfully managed to manipulate the stock prices of this bank, he approached other banks and pledged to pay the order with them and collected more loans. Overall, his loan amounted to more than INR 750 million.
At around the same time, he had created a portfolio called K-10 which consisted of the top companies he picked. His main interest was in low-profile companies that had low market capitalization at that time. He would invest a lot in these companies and exit out making profits, but the real scam was when he was reported to have insider information about the company and then manipulate the prices accordingly. He then used to take advantage of the price rise to create trust in the minds of the investor.
Ketan Parekh – Unearthing of the Scam
The first investigations of the scam were held by both the RBI and SEBI when the market crashed dramatically in 2001 just a day after the budget was declared. At this time, Ketan was accused of insider trading, pump and dump, and circular trading. The investigation went on for many years later and even companies that associated with him during the trading were eventually banned from trading.
Ketan Parekh and Harshad Mehta
It was during the 90s that Ketan Parekh came in touch with Harshad Mehta, who was peaking at that time. Ketan later joined GrowMore Investments, which was created by Harshad Mehta. This company was one of the main suspects of the 1992 Securities Scam. A lot of media reports unofficially stated that the tricks and tips of Harshad Mehta as well as his connections helped Ketan Parekh to execute such a huge scam.
Ketan Parekh Biography
His role in the stock market crash and manipulation is still a case study in many management colleges. His scam had even spread to other countries and reports emerged after 2010 stating that he had lent outstanding amounts to large international corporations in the order of billions of dollars. His bluff and tricks eventually were found out and the huge loan piled up put him into distress. In 2018, he was sentenced to three years imprisonment but later, the Bombay High Court suspended his imprisonment sentence and granted him bail.
|Occupation||Chartered Accountant and Stock Trader|
|Known For||Stock Market Crash Scam of 2001|
|Accused For||Insider Trading, Pump and Dump Trading, Circular Trading, Loans Defaulting|
|Ketan Parekh Spouse||Mamta Parekh|