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Friday, May 15, 2009


In 1982, Reliance Industries came up against a rights issue regarding partly convertible debentures. It was rumored that company was making all efforts to ensure that their stock prices did not slide an inch. Sensing an opportunity, a bear cartel which was a group of stock brokers from Calcutta started to short sell Reliance shares, its being said that nearly 11 lakhs shares of Reliance were shorted on March 18, 1982 and stock went down from Rs.131 to Rs.121 in minutes. To counter this, a group of stock brokers till recently referred to as "Friends of Reliance" started to buy the short sold shares of Reliance Industries on the Bombay Stock Exchange. Ambani through his known brokers indirectly bought more than 8,00,000 shares from that 11,00,000 shares sold by bear cartel. 

The Bear Cartel was acting on the belief that the Bulls would be short of cash to complete the transactions and would be ready for settlement under the "Badla" trading system operative in the Bombay Stock Exchange. The bulls kept on buying and a price of Reliance went to Rs. 152 per share & was maintained till the day of settlement. On April 30, 1982, the day of settlement, the Bear Cartel was taken aback when the Bulls demanded a physical delivery of shares only. To complete the transaction, the much needed cash was provided to the stock brokers who had bought shares of Reliance, by none other than Dhirubhai Ambani. In the case of non-settlement, the Bulls demanded an "Undha Badla" (a penalty sum) of Rs. 25 - Rs. 35 per share. With this, the demand increased and the shares of Reliance shot above Rs. 180 in minutes. The settlement caused an enormous uproar in the market and Dhirubhai Ambani was the unquestioned king of the stock markets. He proved to his detractors just how dangerous it was to play with Reliance.

To find a solution to this situation, the Bombay Stock Exchange was closed for three business days. Authorities from the Bombay Stock Exchange (BSE) intervened in the matter and brought down the "Undha Badla" rate to Rs. 2.00/share with a stipulation that the Bear Cartel had to deliver the shares within the next few days. The Bear Cartel bought shares of Reliance from the market at higher price levels and it was also learnt that Dhirubhai Ambani himself supplied those shares to the Bear Cartel and earned a healthy profit out of "The Bear Cartel's adventure". After this incident, many questions were raised by his detractors and the press. Not many people were able to understand as to how a yarn trader till a few years ago was able to get in such a huge amount of cash flow during a crisis period. The answer to this was provided by the then finance minister, Pranab Mukherjee in the parliament. He informed the house that a Non-Resident Indian had invested up to Rs. 22 Crore in Reliance during 1982-83. These investments were routed through many companies like Crocodile, Lota and Fiasco. These companies were primarily registered in Isle of Man. The interesting factor was that all the promoters or owners of these companies had a common surname Shah. An investigation by the Reserve Bank of India in the incident did not find any unethical or illegal acts or transactions committed by Reliance or its promoters.


  1. hey bhavikk!!

    Gujju's are gamblers.. they want easiest n fast money...and gujju mind are so fast they can find loop holes in any case...i wish they use their mind in betterment of country rather than filling their own pockets.

  2. HI Amit!!
    Hmm..! Yes you are right.
    But these people in the name of investor friendly policies play games & makes Bakaara of investors.They are interested in making their own wealth.Merging & de-merging its subsidiary is all they do.
    Warren Buffet(BERKSHIRE HATHAWAY INC.), Bill Gates(Microsoft), Narayan Murthy(Infosys) are few of the people I admire & want to be, these great personalites have not only made billions for themselfs but have also created wealth for their shareholders in a TRUE,PURE & ETHICAL manner.
    Anyways thanks for ur comment,keep on posting.

  3. Hii Bhavikk bhai
    True even recently ZEE's Subhash Chandra said Never fight with the Ambanis
    He said and I quote "I was angry with myself for having taken up a fight with the Ambanis. I probably shouldn’t have.

    The channel had done an elaborate coverage of how their oil by-products were adulterated. That decision hurt me a lot, which I realised later.

    After the dotcom bust, while all stocks took a dive, ours fell disproportionately. In a normal crash, the price of Zee would have come down from its1,500 peak to about500 or600. But it was down to double digits.

    I was devastated.

    I still remember the meeting with one of the investors in New York. I broke down. I couldn’t believe that I did so in front of an investor. That was perhaps the lowest point of my life "

    Bhavikk bhai Please please reconsider your decision and come back, we need you- India is in its growth phase and we need person like you who will help us making our wealth - Bhavikk bhai we all need you - please come back please a request


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