The turn-of-the-century dotcom boom and bust had its fair share of cons. Among them was the scam involving Home Trade, a brokerage masquerading as a financial portal that emerged at a time in 2001 when Web 1.0 was collapsing. In its configuration it was a Harshad Mehta-meet Ketan Parekh diddle, combining the securities trading of the former with the cooperative banks' angle of the latter.
Home Trade was launched through a Rs 20 crore, high-decibel, advertising campaign featuring celebrities like Sachin Tendulkar, Shah Rukh Khan, Malaika Arora and the then rising star — Hrithik Roshan. The message was a rather blah “Life means more”, but for a brief while, the company’s logo was plastered all over. The product or the service that the campaign was trying to sell appeared to be a mystery and only much later it dawned on people that it was basically just another brokerage firm.
The founder and key figure running the start-up was Sanjay Agarwal, a man with a past that should have raised some regulatory eyebrows. Before his entrepreneurial journey, Agarwal had been CEO of Lloyd’s Brokerage, a part of Lloyd’s Finance. Following a sharp decline in the Sensex in January 1997, the Securities and Exchange Board of India (SEBI) served the firm a show-cause notice on suspicion it had rigged prices. The investigation came to the conclusion that Lloyd’s Brokerage was responsible for the unusual volatility but by then the company had sold off 75 percent stake to a Mauritius-based firm and had been rechristened Euro Asian Securities (EAS).
Despite the charges, the renamed entity escaped any serious censure and the promoters were even allowed to sell off part of their stake to the public in a strange IPO that saw the company listing on the Pune stock exchange and its price zooming. Later it emerged that a cabal of brokers, part of the infamous Ketan Sheth-led ring, had traded the stock between themselves thus artificially inflating its price from around Rs 250 in November 1999 to Rs 850 by September 2000. By March 2002 it was down to Rs 60.
Using these funds along with more from a Mauritian firm, EDTV, owned by Agarwal's brother Dhananjay Agarwal, the company capitalized on the latest mania by projecting itself as a dotcom venture. Its modus operandi though was simple: lure gullible investors looking to make money in the markets and collect commissions from them. With the markets sliding, that soon came unstuck and Agarwal, the 35-year-year-old founder from Kolkata who loved to dress nattily, now turned to speculative transactions, by convincing clients to invest in government securities. In particular, Agarwal targeted cooperative banks.
Within months though, the operation had started unwinding and reports emerged of layoffs and unpaid dues. Many of the stars who had featured in the ad campaigns also complained of non-payment with Tendulkar filing a case after two cheques for Rs 1.1 crore each issued to him bounced.
A NABARD report on the Nagpur District Central Cooperative Bank in April 2002 finally drew the regulator’s lens on the operation and by August 2002, with the investigative agencies closing in, Agarwal was on the run to escape arrest for allegedly duping close to 20 cooperative banks. He was charged with collecting Rs 400 crore from them to buy government securities on their behalf though he would buy and sell the securities to the same banks without handing them the gilts. When the end came, banks were left holding photocopies of the certificates worth zero. It was curtains for Agarwal and along with other promoters of the company he was arrested after a chase.
As usual, the case went on for years and it was only in December 2015, that Sebi finally barred Home Trade and its promoters and associate entities from accessing the securities market for a period of 10 years.
—Sundeep Khanna is a former editor and the co-author of the recently released Azim Premji: The Man Beyond the Billions. Views are personal
(Edited by : Ajay Vaishnav)