Harshad Mehta: The Big Bull of Dalal Street
Harshad Mehta, often referred to as the "Big Bull" of the Indian stock market, is one of the most infamous figures in India's financial history. His rise to prominence and eventual downfall in the early 1990s left an indelible mark on the country's stock market and financial regulatory framework. Mehta's life is a complex narrative of ambition, ingenuity, and exploitation of systemic loopholes that led to one of India's largest stock market scams.
Early Life and Background
Harshad Shantilal Mehta was born on July 29, 1954, in Rajkot, Gujarat, to a modest family. He spent his early childhood in Mumbai before moving to Raipur, where he completed his schooling. Mehta graduated with a Bachelor of Commerce degree from Lajpatrai College in Mumbai.
After college, Mehta worked in various odd jobs, including as a sales executive, but none satisfied his ambitions. In the late 1970s, he developed an interest in the stock market and joined the brokerage firm New India Assurance Company. This decision marked the beginning of his journey into the financial world.
This is the real image of Harshad Mehta:
Career in the Stock Market
By the early 1980s, Mehta had learned the intricacies of stock trading and started his brokerage firm, GrowMore Research and Asset Management, in 1984. Mehta quickly gained recognition for his uncanny ability to predict stock movements and his bold investment strategies.
He became known for identifying undervalued stocks and investing heavily in them. His market moves often caused dramatic price increases, earning him the nickname "The Big Bull." His charisma and flamboyant lifestyle attracted widespread attention, making him a media darling.
One of his most notable feats was his investment in ACC (Associated Cement Companies), whose share price skyrocketed from ₹200 to ₹9,000 under his influence. He justified this by arguing that the company was undervalued compared to its replacement cost, a term that he popularized in Indian financial circles.
The 1992 Scam: The Rise and Fall
While Mehta's success seemed meteoric, it was built on fraudulent practices that exploited systemic loopholes in the banking and stock market infrastructure.
How the Scam Worked
Mehta used a method involving "ready-forward" (RF) deals, which are short-term loans between banks. In an RF deal, one bank sells securities to another with an agreement to buy them back at a later date. Mehta exploited these deals in the following ways:
- Forged Bank Receipts (BRs): Mehta procured fake BRs from smaller banks and used them as collateral to obtain funds from larger banks.
- Stock Market Manipulation: The funds from these deals were then used to invest heavily in specific stocks, driving their prices up artificially.
- Profiting from Price Manipulation: Once the prices were inflated, Mehta sold his holdings for massive profits and repaid the banks.
This cycle continued, creating an illusion of a booming stock market. Mehta's activities created a bubble, with several stocks experiencing unprecedented price surges.
Exposure of the Scam
In April 1992, journalist Sucheta Dalal exposed the scam in The Times of India. Her investigation revealed how Mehta had siphoned off approximately ₹4,000 crore from the banking system to fund his stock market activities.
This revelation sent shockwaves through the financial world, causing a massive stock market crash and exposing the fragility of India's financial systems.
Legal and Financial Fallout
After the scam came to light, Mehta was arrested and faced multiple charges, including criminal conspiracy, cheating, and forgery. Over 70 criminal cases and 600 civil suits were filed against him.
Key Legal Battles
- Arrests: Mehta was arrested multiple times during the investigations, starting in 1992.
- Bankruptcies: His brokerage and associated companies were declared bankrupt, and his assets were liquidated to repay creditors.
- Judicial Outcomes: While Mehta was convicted in a few cases, several others remained unresolved at the time of his death.
The scam had far-reaching implications for India's financial sector. The Securities and Exchange Board of India (SEBI), which had been established in 1988, was given statutory powers in 1992. This allowed SEBI to implement stricter regulations and improve oversight of the stock market.
Life After the Scam
Despite his tarnished reputation, Mehta continued to claim his innocence, insisting that he had not broken any laws but merely exploited existing loopholes.
He attempted to make a comeback in the stock market but faced significant legal and financial obstacles. His public appearances were rare, and his influence in the financial world dwindled.
.jpg)
Death and Legacy
On December 31, 2001, Harshad Mehta died of a cardiac arrest in Thane, Maharashtra, while in judicial custody. At the time of his death, 27 cases were still pending against him.
Impact on India's Financial System
The Harshad Mehta scam was a wake-up call for India’s financial regulators and policymakers. It led to the introduction of several reforms, including:
- Stricter banking regulations.
- Improved stock market transparency.
- Strengthening of SEBI's role as a regulatory body.
Pop Culture Influence
Mehta's story has inspired several books, films, and television series. The most notable among them is the 2020 web series Scam 1992: The Harshad Mehta Story, based on the book The Scam by Sucheta Dalal and Debashis Basu. The series received critical acclaim for its portrayal of Mehta's rise and fall and reignited public interest in his life.
Lessons from Harshad Mehta’s Life
Harshad Mehta's journey is a cautionary tale about unchecked ambition and systemic flaws. While his financial acumen and risk-taking ability were commendable, his methods highlighted the dangers of exploiting regulatory gaps.
His legacy serves as a reminder of the importance of ethical practices, robust regulations, and investor awareness in building a stable financial system. The name Harshad Mehta remains synonymous with both the possibilities and perils of the stock market in India.