Stories of the biggest scams in India | #139
The secret trading time of the Indian Stock Market ⏰
Friends,
The latest season of Shark Tank is upon us. Here’s a show where rich folks running companies with high customer acquisition costs and no profits, critique pitches of people who are chasing unicorns.
The startup boom in India has seen the growth of many entrepreneurs who are willing to work hard and build sustainable businesses, but it has also led to entrepreneurs who chase high valuations. This past week we saw Amit Bhasin, the founder of GoMechanic, claim on a LinkedIn post that he cheated investors, in their quest for exploring growth.
This week, we look at some famous scams in India where people cooked books like they were cooking something else.
Things we learnt this week 🤓
Before Amit Bhasin’s LinkedIn post, there was Ramalinga Raju. Back in 2009, when emails were more in fashion, Ramalinga Raju sent an email to SEBI admitting that he manipulated the results of Satyam Inc. Satyam reported revenues of $1.1B, whereas in actuality it was $100M. PWC who performed the audit and certified the accounts, paid a steep price as SEBI banned them from performing audits for any company for 2 years. Ramalinga Raju famously said that he was riding a tiger, and didn’t know how to get off without being eaten. Raju’s clean image has had many spots now.
Ketan Parekh had a nice scheme going. He would buy stocks of companies that had low liquidity and low market capitalization. He would start fictitious trading within his own network of companies. This would inflate the rate of stocks and looking at this, retail investors would get interested and drive up the price higher. Ketan would then slowly liquidate his holding, taking home a neat profit. Stock prices for companies like Sonata Software, moved from 90 to 2150. Once the stock market crashed and the NDA government set up an inquiry to find out what happened and Ketan got caught. SEBI banned him from trading for 14 years and Ketan also served time in prison. The regulators drew a line at the circular trade that Ketan had setup.
One of the first scams in India, happened as soon as it became Independent. In 1948, the high commissioner to Britain, VK Krishna Menon ignored all protocols and signed a contract worth 80 Lakhs for 200 jeeps with a firm. This was during the war when India needed more jeeps. The catch - 2000 brand new jeeps from the USA or Canada would have cost the same. Menon argued that the UK jeeps would arrive earlier and were essential for the war effort. The company selected was a little known firm - Anti-mistantes. Their lack of capital meant only 155 jeeps could be delivered, none of which were usable. Menon then signed a contract with another firm, which again failed to deliver the required number of jeeps. It looks like VK Krishna Menon took the slogan ‘Jeep bhar ke pyar karo’ to heart.
From IWTK, with love 💌
Rocking Star Yash has had an interesting life. Learn more here.
Did you know there is a secret trading time at the Indian stock markets during Diwali. Read more here.
Only In India 🇮🇳
“Once you get a dead-end, take left.” Bhikharam has ensured that all parcels will reach him, with his address.
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Thanks for beginning our morning with scams!