The Harshad Mehta Scam Exposed. The entire mechanism and who were the key parties involved, the aftermath and the effects of the scam on the stock market and the overall Indian Economy. The ethical issues involved and the action taken to prevent any such scams in the future by the government.

1. HARSHAD MEHTA: EXPOSED
The “Big Bull”… Gone Wild

2. THE INDIAN STOCK MARKET
& the Banking Sector: Home of the “Big Bull”
 Stock Market
Lists the Indian companies on stock
and trade shares.
 Banking Sector
 Gives loans, accept people’s
deposits and regulate government
accounts.
 POLICY- Every bank is supposed
to invest certain amount in
government securities/bonds at
the end of everyday.
 Scam referred to as the
‘Technology security stock
scam”

3. HARSHAD MEHTA
“From rags to riches”
 Born: July 1954 to a Gujarati
family of modest means
 Father: small time businessman in
Mumbai
 Family shifts to Raipur, Mehta
returns to Bombay, City of Dreams
after completing education
 Started as Dispatch Clerk for New
India Assurance
 Keen interest in the Stock Market
 Quits job in early 80s, becomes
sub- broker for Shah & Sheth
 Starts investing heavily in Stock
Market after being mentored by
Shah & Sheth

4. “I thought I’d be like Pied Piper”
 1987: Starts GrowMore
Research & Asset Management
along with brother Ashwin
HARSHAD MEHTA
On the rise
 Gets multiple stock exchange
memberships
 “Charismatic, recklessly
ambitious” ,role model for
investors
 Makes waves in Stock Market:
Replacement Cost Theory
 Darling of Business Media,
earns name of “Big Bull”
 Flamboyant and flashy lifestyle
 Lives like a movie star:
15,000sq ft house, swimming
pool, golf patch
 Taste for flashy cars leads to
ultimate downfall

5. Issued cheque
favoring HM on
Day 1
Issued cheque
favoring HM on
Day 2
Issued Govt
Bonds taken
from Bank B
Issued Govt
Bonds taken
from Bank C
Sold Govt Bonds
on Day 2
Sold Govt Bonds
on Day 1
Promised to pay on
Day 3 & presented
fake BRs
Promised to pay
on Day 2 &
presented fake BRs
Repaid money
taken from
Bank D on Day 2
Issued
fake BRs
Excess funds
channelized towards
buying stocks
HARSHAD MEHTA
(Broker)
BANK A
BANK C
BANK B
STOCK MARKET
BANK X
BANK D
MEHTA’S TRADE MECHANISMBuyerofsecurities
Sellerofsecurities

6. Who was involved?
the who’s who
 Harshad Mehta
 The Indian Government
 Bank of Karad, Mumbai
 Metropolitan Co-operative Bank (MCB)
- both the banks issued fake BRs.
 Associated cement company (ACC)

7. The ‘Big Bull’… Gone Wild
Unearthing the scam

8.  Charged with 72 criminal offences
 More than 600 civil action suits
were filed against him.
 Convicted in September 1999:
 5 years of rigorous imprisonment
and a fine of RS 25,000
HARSHAD MEHTA
The End of an Era
 Arrested on 9th November,
1992 : Misappropriating
2.8million shares of 90
companies
 Scam value as per 1990s:
Rs4000cr
 Allegation of bribe to PM of India
Value as per 2011

9. “JUSTICE OR FARCE?”
 Rs. 6170 crore have been
recovered and payments
been made to major
claimants like SBI and the
Income Tax Department
 270 cases still pending
 Junior bankers at SBI and
UCO sentenced to rigorous
imprisonment;
Many left bankrupt, commit
suicide
Then Prime Minister P.V.
Narsimha Rao and other
politicians allegedly
associated with the scam
remained totally unaffected
?

10.  Sharp fall in share prices.
 Genuine investors were
being suddenly robbed by
the government as their
shares became worthless
pieces of paper.
 The governments
liberalization policies came
under serious criticism.
 Foreign mutual funds
became more remote than
ever.
 Euro issues planned by
many companies has to be
re-evaluated.
 Concept of Bank Receipt
finally removed
The Aftermath
impact of the scam