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'KP firms' default Rs 32.18 bn: Sebi

Rakesh P Sharma

The Securities and Exchange Board of India's investigation into the 23 firms associated with or controlled by Ketan Parekh, has bared a combined default by these entities to the tune of Rs 32.18 billion.

The Sebi probe has also indicated that funds given to a clutch of Parekh-linked entities appear to have been utilised for stock market operations.

In its interim report submitted to the Joint Parliamentary Committee in December, Sebi has said: "Large funds were given to these entities of Ketan Parekh and associates with a view to hide the nexus between the source of the fund flow, i.e., by corporates/companies and ultimate user of these firms in the stock markets. It was observed that funds were received by certain entities from banks as loans and overdrafts which were diverted to other entities for acquiring shares/meeting other obligations."

Dissecting the nature of fund flows, Sebi pegged the default to the corporate sector at Rs 12 billion, to banks at Rs 14.25 billion, and to overseas corporate bodies at Rs 4.50 billion.

Senior Sebi officials said around Rs 12 billion was received by various Parekh entities from four corporate houses -- Zee Telefilms, Himachal Futuristic Communications, Adani group and DSQ group.

On funds sanctioned by the banking sector to Parekh entities, Sebi said the outstanding amount to the Madhavpura Mercantile Co-operative Bank is Rs 8.88 billion.

Besides, the outstanding amount to Mukesh Babu, a sub-broker with Parekh entities, is Rs 2.26 billion.

According to the Sebi report, funds received by Parekh entities from ICICI Bank, Centurion Bank and Bank of Punjab as on March 31, 2001, were to the tune of Rs 655 million.

The outstanding amount to Global Trust Bank was around Rs 2.50 billion and Bank of India it was Rs 1.38 billion.

The Sebi investigation also pointed out that the Triumph Group -- another entity alleged to have Parekh links -- did not provide for non-payment of sales proceeds of around Rs 4.50 billion to a set of OCBs.

The Sebi probe into two associate companies of Parekh -- Panther Fincap Management & Services and Classic Credit -- has revealed that between January 2000 and March 2001 around Rs 14.80 billion and Rs 13.30 billion, respectively, were transferred to Kolkata-based entities by these firms.

According to Sebi, a final picture around the deals will emerge only after all the bank accounts are analysed -- an exercise, which will take time.

Meanwhile, Sebi's probe unravelled a nexus between Parekh and three Kolkata-based broking entities -- A K Poddar group, D K Singhania & Co and Sanjay Khemani.

These brokers had excessive purchase positions marked for delivery and on account of their failure to meet pay-in obligations the settlement process was disturbed.

The Sebi probe also indicated that Singhania had received around Rs 8.28 billion from Parekh and associate entities and the Poddar group around Rs 8.87 billion.

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