Until SEBI identified Nirmal Bang as one of the big bear operators in the run up to Yashwant Sinha’s much-acclaimed budget, few outside the trading community had heard of the man. Yet, as this paper wrote in January , Bang was as pivotal to large market operations or price ramping than the more glamorous and better known names such as Ketan Parekh or Nimesh Shah.
Unlike those two, Nirmal Bang did not make prices move but his multiple cards and sub-broking entities created a nationwide network that was a magnet for day traders and the fastest way of spreading the word that a certain stock was ‘in play’. Moreover, he had this nice habit of managing his finances through a delicate balancing of his cash flow and never hassling clients for margin payments. SEBI’s investigation shows that whether it was Ketan Parekh or Anand Rathi or a Shankar Sharma, they all traded through Bang’s companies. SEBI has identified five entities through which Bang operates — Bama Securities Ltd., Nirmal Bang Securities and Bang Equity Broking, and two sub-broking firms called Bang Securities and Nadi Finance and Investment, which was registered sub-broker to three entities — NBS, BSL and Suresh Rathi Securities.
The SEBI investigation has documented reams of transactions by Bang’s multiple trading entities as evidence of heavy short sales in the period leading up to budget 2001 — sales that smacked of bear hammering with a clear ‘manipulative intent’. For instance, on March 2, 2001, in the space of seven minutes between 1235 to 1242 hours, when the Global Telesystems price were in the throes of a 16 per cent collapse, three of the Bang brokerage firms had sold several lakh shares — a clear attempt to create panic and force a collapse. But more interesting are Bang’s curious mix of clients.
Bang and Shankar Sharma: SEBI’s sleuths found that Shankar Sharma, chief of First Global Securities, was a big client of Bang. They discovered that Bang’s companies had entered highly curious ‘synchronized trades’ of over Rs 50 crores with Vriddhi Confinvest India Ltd. a proprietary sub-brokerage outfit of First Global — these trades, conducted between February 20 and March 2, had matching scrips, quantities, and prices, and led to clear suspicion of manipulative circular trades. SEBI says there is a ‘definite patter of circular trading between First Global and the Nirmal Bang group ... which have been structured by synchronizing the order entry for manipulative purposes.’
Bang and Palombe: Palombe Securities is a sub-broker firm, run by Bhaskar Hingad, and has an oddly complex relationship with leading market operators. One of its directors was a former associate of the late Manu Manek who, during the 1980s used to be the kingpin of the BSE. Palombe had trading terminals of each of Bang’s various entities installed at its office. It was also very close to Ketan who conducted a big chunk of his operations through the firm. Yet, it is Palombe that introduced Shankar Sharma to Bang, through yet another firm called Consortium Securities (CSL). Palombe Securities and CSL shared the credit for introducing Shankar Sharma to Bang Securities and split 50 per cent of the introductory brokerage of Rs 30 lakhs in the year -2001. SEBI also found instances of liberal transfer of funds between Palombe, Nirmal Bang and Sharma.
Bang and CSL: It was Palombe again that introduced Parekh to the Consortium group, which went on to become a large operator for him. Consortium has three entities with memberships at the BSE, NSE and the DSE and sub-brokerage outfits which are registered with Vikram Kenia Securities and Bang Equity Broking.
Palombe in turn, was a client of CSL, and its accounts in the Consortium books show that after the end of February 2001, when its balances were down to zero, it has had serious payment problems and has been maintaining debit balances. SEBI’s report says a limited review of the CSL Group’s records indicates the need for a detailed inquiry into its large trading operations on its own account as well as for Ketan Parekh, First Global, Palombe Securities and Nirmal Bang.
For instance CSL’s bank accounts show unsecured loans of over Rs 10 cr from five corporates including four companies belonging to HFCL and one belonging to Max India. SEBI and the Department of Company Affairs need to probe these for diversion of funds. Apart from this, Omega Finhold an associated of CSL received inter-corporate funds from companies which were again used for Ketan Parekh’s operations. SEBI findings throw up several broad leads that need detailed inquiry. For instance the report says that the Nirmal Bang-Palombe-CSL troika had deals with several bear operators including Ajay Kayan, Rakesh Jhunjhunwala, Anand Rathi and Ramesh Damani which need further scrutiny. Chances are these investigations would reveal how companies divert bank and public issue funds with impunity for their market operations. In fact, the Videocon, BPL, Sterlite nexus with Harshad Mehta may seem like peanuts as compared to the goings-on on 2001.