An intriguing finding of the investigation into Ketan Parekh’s (KP) price ramping operation is the role of the diamond industry. Investigators have found that two diamond companies — B Arunkumar & Co and B Vijaykumar & Co — hold a whopping Rs 200 crore worth of Himachal Futuristic Communication (HFCL) shares. These shares — 20 lakh in number — were purchased sometime in September when the price was approximately Rs 1,000 each. Investigators wonder whether this purchase was KP’s investment which was parked with the diamond companies or their own. Why did the diamond-wallahs not sell out when prices began to slide? Investigators believe that the decision to hold on, is the key to the diamond companies’ nexus with Global Trust Bank (GTB) and GTB’s links with KP. The agencies are probing whether these diamond companies hold substantial shares in GTB through benami investment companies.
Diamond links-insider deals While on diamond companies, there is more to the reported purchase of Bank of Madura shares by B Arunkumar & Co just prior to its merger with ICICI. The story is that B Arunkumar & Co indeed bought a substantial chunk of shares from AC Muthiah’s SPIC; it is also true, the SPIC ended up the loser, because it had no clue that an imminent merger would push up the value of its holding. Ironically enough, the insider trade, which was transacted through LKP Securities, had little to do with Bank of Madura’s merger with ICICI. Informed sources tell us that Bank of Madura was flirting with Global Trust Bank (GTB) before it tied the knot with ICICI. So the diamond company had bought the shares in anticipation of a merger with GTB. After all, B Arunkumar’s is close to GTB and is also one of its top borrowers. Our sources say that SEBI will have to decide the tricky issue of whether a purchase can be termed an insider deal, when the event anticipated by the purchaser has failed to materialise. And whether the purchaser is liable for having profited from an event about which he had no knowledge.
No tehelka this time There is a huge tehelka on the stock markets, but diehard watchers of the Zee channel may have missed the fact. The TV network, which did a multi-part broadcast of the tehelka tapes, has been most reticent about reporting the Ketan Parekh scam. After all, Zee was one of three scrips that KP was stuck with when his castle of cards came tumbling down. It is only in the last week that the seriousness of the group’s involvement with KP became public knowledge. Worse still, the business group continues to trip over itself in trying to explain its diversion of money to the stock broker. Both AB Corp and B4U, whose shares it claims to have purchased with the diverted funds have denied its claims and challenged its surreptitious acquisitions of their equity.
1=10 & 1=10,000 While on Zee, what do you make of these numbers? This is no mathematical equation, but was a slogan of sorts of the Ketan Parekh group when they began ramping up Zee’s share price. It meant that each Zee share of Rs 10 face value scrip was split into 10 of Re 1 each. And each of these Re 1 share would then be made to soar to a phenomenal Rs 10,000. The scrip only managed to touch Rs 2,330 before it started tumbling; it is now down to Rs 83 and still falling.
No complaints The difference between the Ketan Parekh Scam of 2001 and Harshad Mehta Scam of 1992 is this — Harshad operated through a close group of cronies while Ketan created a large network of satellite brokers. Many of the best brokers did business with him, probably because NH Securities, run by his father was once a very well respected firm. The result: several of top brokerage houses in the country are as bankrupt as the crooked speculative firms who have also operated for Ketan Parekh. They had also done what was unthinkable by their standards — sold off client shares in order to meet their own payment difficulties. Many have mortgaged their property and offices to raise money but are falling short. Some were duped by the likes of Arvind Johari of Cyberspace Infosys which also went under. Such brokerage firms include those that have boasted the most impeccable payment records and used to claim that they have every settlement audited by independent auditors. But why are there no investor complaints? Simple. The brokers have told them that if they complain, they can forget about their money because they have none. However, if they are willing to wait until the market improves they will pay them back in installments. Given their impeccable track-record, most clients have agreed to wait.