Who's Ketan Parekh and why's he bad for the market?

Every stock, much like a race horse, needs a jockey to perform and stock broker Ketan Parekh, the equivalent of Pesi Shroff, knew how to turn even duds into high performers at Dalal Street. That was his ticket to fame.

In the late 90s when the stock markets and unscrupulous promoters of listed companies badly needed someone to fill the vacuum created by Harshad Mehta, the original Big Bull, an aggressive and driven young man in his late 30s, Ketan Parekh, came forward to fill up this vacuum. From 1999 till 2001, this raging bull who was trained by master manipulators - the late Harshad Mehta and his brother Ashwini Mehta - made millions of dollars for himself and billions for his clients (owners of listed companies) and their party seemed to be unending. Parekh, 49, is banned from trading till 2017, according to market regulator SEBI for having rigged the market by wrongful means.

In 2001, a payment crisis triggered by Kolkata-based beers brought Parekh, who was known as KP, down. A probe by market regulator SEBI along with other investigating agencies unearthed the skeletons and KP was proclaimed a rogue trader. Banned in the stock market since 2001, India's second Big Bull, KP has tried his best to stay out of the limelight. So much so that his phone number has also been transferred to someone else. Mumbai- based textile businessman Amit explains how he is often flooded with phone calls by people looking for "Mr. Parekh", a man Amit doesn't know of. "This is my number and I have been using it for over eight years now," Amit told Mail Today, "But time to time I do get calls from people who want to speak to Mr Parekh. Which Parekh? I don't know. My service provider never told me that it was a used number." Parekh's broking firm NH Securities is well known in the market. Even today, when he remains barred from trading, many in the market still consider him a demigod and work for him. After his conviction in 2008 followed by his ban in 2001, Parekh has been living a very quiet life. In June 2009, the SEBI had banned 26 entities for acting as fronts for KP to undertake share trading, but KP goes on record to say that he has kept his distance from stocks since the ban imposed on him.

Like his mentors the Mehta brothers, KP used to be involved in circular trading to jack up share prices for the benefit of promoters and himself before finally dumping devalued shares with financial institutions like UTI and LIC etc. He was jailed with two others for one year for siphoning off Rs 48 crore from a unit of Canara Bank in a 1992 scam.

Other side of KP

The soft spoken, thin, tall and Chartered Accountant by qualification, KP comes from a family of stock brokers and is known to maintain a very low profile. A year in jail combined with massive losses in business and constant hounding by regulators as well as investigating agencies have further mellowed him down.

A person who constantly shies away from parties or any signs of flamboyance, the only sign of the Gujarati's wealth was his envious fleet of luxury cars. He loves a good meal at The Oberoi and an occasional drink with his close friends. His list of friends have included politician Amar Singh who introduced him to Amitabh Bachchan, Vinay Maloo of Himachal Futuristic and Australian media baron Kerry Packer besides promoters of several companies who wanted his services for a price.

Currently a recluse, KP operates from his office in Nariman Bhavan, a stone throw away from The Oberoi, Mumbai and Maker IV, the headquarters of Reliance Industries. He is also often seen walking on the footpaths of Nariman Point, without a security cover one would expect a man in his position to have. The unassuming man, who can easily pass by unnoticed, lives in an apartment by the Marine Drive with his family (wife and two daughters). His family is believed to have relocated to London for his ailing daughter's treatment.

On a rare occasion, KP had hosted a mega bash called 'Party of the Millennium'at Mandwa in Alibaug that was attended by politicians, business magnates and film stars. A highly sought after man owing to his newly-found wealth, KP is believed to have been wooed by a Bollywood actress too; brokers at Dalal Street often talk about how the tinsel town girl brought bad luck to Ketan Bhai.

His business dealings

KP's business practices were unconventional. He was no ordinary broker living on brokerage commission stemming from buying and selling of shares for clients.

Like Mehta and many others, KP turned into an operator to drive share prices with ulterior motives, though unlike Mehta, he did not use public money to ring the markets. Promoters, through their investment companies provided him with capital to jack up share prices. He also made use of his contacts at Global Trust Bank and Madhavpura Mercantile Co-operative Bank to access funds for market manipulation. He was also called the 'Pentafour Bull'and 'One Man Army'for his aggression and ability to instantly take Sensex either way.

"He may be down to earth, but he is very smart and shrewd. He is very aggressive and is known for his fast moves. KP stocks used go up like a rocket - there was no gradual build up. If he decides to bring a stock down, he would do it instantly"said a stock broker on conditions of anonymity. He was well aware of the power of online trading and used to build up huge volumes without anybody taking any notice. He would buy into smaller companies through private placement and then rig share prices. According to an investigation by SEBI, Parekh used to make use of bank and promoter funds to rig the markets. When he was arrested in March 2001, Parekh was in custody for 53 days.

A man who used to do a lot of travelling in order to fix deals, KP is now mostly confined to his house and office in South Mumbai.

Playing with a pack of 10 stocks

During his peak period he used to drive a pack of 10 stocks known as K-10 stocks. These included names like Global Telesystems, Zee Telefilms, HFCL, Silverline, Satyam Computers, Aftek Infosys, DSQ Software, Ranbaxy, Pentamedia Graphics and Visual Soft. Sometimes Digital Global and SSI also dubbed as K- 10 stocks.

As a savvy trader, KP took position in technology stocks to ride the IT boom. Not many could afford to buy Infosys and Wipro shares, the promoters of these companies were not 'market friendly'either; KP then decided to create his own bellwethers, for which he received active support from fund managers and some FIIs besides promoters.

With grey clouds hovering over the market in 1998, the economy was passing through a rough phase. Promoters were not being sanctioned bank loans and were unable to raise money. So, KP was approached to jack up share prices and bring the much needed liquidity for promoters. In the process, KP made pot-loads of money.

The latest IB report has indicated KP and his cartel were recently involved in rigging share prices of Dewan Housing Finance, Goenka Diamond, Orchid Chemical, IVRCL, GMR Infra, Pantaloon Retail, TBZ IPO, KS Oils etc.

Pulling the strings from backstage

KP may have been implicated in the 2001 securities scam and serving a 14-years SEBI ban, but the market knows that he has been active. Crooked promoters approach him with money bags and profit sharing arrangements to 'chalao 'their stocks for multiple benefits. Because he is banned from trading, it is very difficult to establish his involvement.

Brokers often talk about KP's partnership with a hot-shot politician's son - a partnership which has enabled KP to make enough money in 2006-07 to pay off Rs 400 crore of his liabilities to Madhavpura Mercantile Co-operative Bank. He still owes Rs 400 crore to the depositors of this bank which was liquidated after the scam.

According to the latest IB report, KP and his associates are still engaged in driving up share prices through creation of false volumes. The report says that the cartel is continuing its illegal activities by way of circular trading, insider trading and use of front entities to ring off prices. It is also using illegal means to buy shares (through pre-placements) so that the prices rise in the run up to an IPO or a QIP. The cartel is still buying shares in large volumes in a single day, causing stock prices to shoot up despite a bearish sentiment; they are also in touch with LIC and other insurance company officials to sell these shares which would be devalued later.

SEBI may not have any evidence to nab KP, because all the traders are in benami, but it is an open secret that KP is still helping promoters rig the market. He has offices in Singapore, Dubai, Mauritius and London where N02 transactions are engineered.

Many were involved in rigging the market, but he was one of the very few to be punished. "He is a victim of the system. Why were promoters of Zee and HFCL let off? He knows that he has become a punching bag," said Parekh's friend on the condition of anonymity.

The Rg Buster

A veteran bear operator of the 70s and 80s, Manu Manek was a big badla financer who even evoked fear in the mind of then rising Dhirubhai Ambani. In the mid 8Os, Ambani deployed Anand Jain to smash the Manu Manek-led anti-Reliance bear cartel that was ripping apart Reliance stocks. Manek had the financial power to advance finance for about five lakh shares every fortnight and rig the market.

The original Big Bull

Harshad Mehta came to the limelight for rigging the stock market and causing a Rs 5000 crore financial scandal in the BSE securities scam of 1992. He was tried for nine years and died behind bars in Thane 2001 as a broken man.

India's original Big Bull, Mehta was known for his flamboyant ways and fleet of imported luxury cars.

Exploiting the loopholes in the banking system, Mehta and his associates siphoned off funds from inter-bank transactions and bought shares heavily at a premium triggering a rise in the Sensex.

He was also accused of offering a bribe of Rs 1 crore to former prime minister P V Narasimha Rao to hush up the case against him. Despite the action taken against him, he made a comeback by illegally jacking up share prices of BPL, Sterlite and Videocon in the late 90s.