Finance Case Study - The Ketan Parekh Scam|Finance|Case Study|Case Studies

The Ketan Parekh Scam

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Case Details:

Case Code : FINC006
Case Length : 9 Pages
Period : -
Pub. Date : 2002
Teaching Note : Available
Organization : SEBI
Industry : Finance
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Factors that Helped the Man

According to market sources, though 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 Aftek Infosys would have cost him Rs 50 million, while the Zee and HFCL stakes would have cost Rs 250 million each.

Analysts claimed that 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. He also borrowed from companies like HFCL...

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

The System that Bred These Factors

The small investors who lost their life's savings felt that all parties in the functioning of the market were responsible for the scams.

They opined that the broker-banker-promoter nexus, which was deemed to have the acceptance of the SEBI itself, was the main reason for the scams in the Indian stock markets.

SEBI's measures were widely criticized as being reactive rather than proactive. The market regulator was blamed for being lax in handling the issue of unusual price movement and tremendous volatility in certain shares over an 18-month period prior to February 2001.

Analysts also opined that SEBI's market intelligence was very poor...

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