HARSHAD MEHTA 1954-2001

A few days after his 111-day incarceration in 1992, some of his friends organised a party for Harshad Mehta. Held in a central Mumbai restaurant, the party was infested with virtually the who's who of the financial markets. Attendants in brightly coloured shirts served an assortment of cocktails and snacks at what was dubbed the Hawaiian Night. In this surreal atmosphere a banker walked up and asked Mehta how he-a Jain and a teetotaller-would maximise the return at such a party. Mehta cackled and said, "You need alcohol to feel high. I am bullish and feel high naturally." Even as the banker reeled under the effect of alcohol and the big bull's logic, Mehta added "Lala, it's a matter of perception."

Perception. To Mehta it was not just another word, it was a mantra, his calling card. In the summer of 1991, when the BSE Sensex was floundering at 1100, Mehta propounded the asset replacement theory: what would it cost to set up another company with the capacity and reach of ACC, he asked. By February 1992, after he had asked this a few more times, the ACC scrip had shot up from about Rs 500 to Rs 10,000.

Corporates sought him, brokers plagued him with calls and people waited at lifts and hotel foyers for that elusive "tip". His Toyota Lexus became the symbol of rags-to-riches success. As the Sensex shot up to over 4000 by April 1992 and even certified duds like Karnataka Ball Bearings rose from sub-par to Rs 227, Mehta surfaced with a halo so potent that he could call himself a "liar". The truth: not everyone believed him. The bear cartel, the Income-Tax Department and the RBI were among those scanning his trail.

To give the devil his due, it was amazing how Mehta created an opportunity out of a maze of regulations. Banks-forced to invest or lend two-thirds of their kitty at subsidised rates-were starved of profits. Mehta stepped in and offered them profits via securities trading. Securities trading was essentially against bankers' receipts and physical delivery took 90 days which Mehta turned into a line of credit. Secondly, given the poor state of reconciliation on who owned what, the bankers' receipts became securities, affording Mehta an unending supply. Mehta had in a sense managed funding by banks-without the banks' consent.

As the scam unfolded, the Sensex tanked to sub-3000 levels and thousands of investors lost monies, the angelic halo turned into a villainous glow. But Mehta didn't think he had wronged those who prayed at his parish. Indeed, he blamed the system, the bear cartel and politics. At public meetings, through his columns and his website he would point out that the Indian system and psyche were biased towards bears. "It's easy to be pessimistic in India. Profitable too," he lamented.

But it didn't daunt him. He would solicit meetings with some of the top corporates in the country and present his ideas on restructuring and on unlocking hidden values. He even authored a paper for Manmohan Singh for his 1993 budget. Throughout this period, he battled in courts and outside. He was even barred from trading as an investor for life. He owed the banks Rs 1,600 crore, faced income-tax claims of over Rs 10,000 crore and had 72 cases against him. A lesser man would have crumbled. Not Mehta.

Six years after his first essay, Mehta authored another in 1998 as he ramped the share prices of BPL, Videocon and Sterlite only to fail again. Many believe that the fatal flaw in Mehta's approach was entirely human: a sense of invincibility. The world over, bulls enter with an exit strategy. Except Mehta. At the height of the April 1992 crisis when friends advised him to exit and settle with the SBI, Mehta refused citing issues like capital gains. "Perhaps," says a friend, "he equated exit with failure."

But Mehta did succeed in exposing the chinks in the system. It was the 1992 scam that hastened the setting up of the National Stock Exchange, of computerisation and perhaps demutualisation. Even in terms of rendering justice, Mehta has left a lasting legacy. Nearly 10 years after the scam, not one bank has got its money back. Neither has the Income-Tax Department got its dues. Though 72 cases were filed not a single final conviction has come through. Lawyers believe that most of the criminal cases relating to the scam may have to be dropped because Mehta was the prime accused. In his death, Mehta has underlined the need for speedier justice.

The burden of these issues could have been the reason Mehta increasingly sought solace in spirituality. That didn't stop him from being bullish though. In his last interview he said India would be one of the two largest markets in 2002. The day he died, the Sensex rose by 77 points, almost in tribute. Mehta would have approved.

-V. Shankar Aiyar