Once In­dia’s big boy on the bourse, Jig­nesh Shah is now chased by in­vestors duped by his firm

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un­aware of the go­ings-on at NSEL.

His fa­ther, Prakash Shah, an iron and steel trader, moved to Mum­bai from Gu­jarat in 1963. Jig­nesh grew up in Mum­bai where he stud­ied soft­ware engineering at Mum­bai Univer­sity. He started his ca­reer at

BSE where he learnt the com­plex work­ing of a stock ex­change. On his in­ter­na­tional as­sign­ments to the Hong Kong and Tokyo stock ex­changes as well as Nas­daq, Jig­nesh found what he was go­ing to do back home. The engi­neer in him dreamed of trans­form­ing trad­ing in In­dia with com­puter tech­nol­ogy.

In 1995, he launched an in­no­va­tion which would rev­o­lu­tionise trad­ing in In­dia. From a 250 sq ft of­fice in South Mum­bai’s Fort area, with just Rs 5 lakh raised by mort­gag­ing his flat, he launched Fi­nan­cial Tech­nolo­gies ( FTIL), the hold­ing com­pany of NSEL. Jig­nesh cre­ated ODIN, a front- end soft­ware and risk- man­age­ment sys­tem for broking houses, which be­came a rage with traders in stock and com­mod­ity fu­tures, and gar­nered a 70 per cent mar­ket share.

It was a feat of en­ter­prise and in­no­va­tion, yet it was quite in or­der for a globe-trot­ting, stock-savvy engi­neer. What came next was in­cred­i­ble. In 2002, Jig­nesh’s tech­nol­ogy com­pany ap­plied for a li­cence for a com­mod­ity ex­change. That was un­heard of in the fi­nan­cial world of Mum­bai. What could a tech start-up do with a bourse li­cence? Within months of get­ting the li­cence, he set up MCX, which com­peted with the BSE. By of­fer­ing in­vestors online trad­ing in com­modi­ties, MCX broke new fi­nan­cial ground. It cre­ated hordes of com­mod­ity in­vestors even in the deep re­cesses of the coun­try. MCX put metal on the mind of the In­dian in­vestor when other com­mod­ity ex­changes were fo­cused on agri prod­ucts. Jig­nesh not only iden­ti­fied a large num­ber of new in­vestors, but also made com­modi­ties as lu­cra­tive an as­set class as eq­ui­ties. MCX soon be­came In­dia’s largest com­modi­ties ex­change, and it con­tin­ued to grow. In 2011, it be­came the world’s fifth-largest com­mod­ity ex­change, re­plac­ing China’s Dalian Com­mod­ity Fu­tures Ex­change, ac­cord­ing to the

Wash­ing­ton-based Fu­tures In­dus­try As­so­ci­a­tion. For the first quar­ter of fis­cal 2014, MCX had an av­er­age turnover of Rs 48,000 crore. Fired by his early suc­cess, he saw fu­ture in emerg­ing mar­kets. He went on to set up ex­changes in Sin­ga­pore, Bahrain, Dubai, Mau­ri­tius and Botswana.

With the suc­cess of FTIL and MCX, which were also listed on the bourses, Jig­nesh found him­self in good for­tune. It showed on him. Suave and quick-wit­ted, he was of­ten seen in fine clothes. He also shifted his ad­dress from sub­ur­ban Kan­di­vli to a plush dou­ble-storey bungalow in Juhu. In the city of cin­ema, he chal­lenged reel life with real life, and won. He was one of the very few fi­nan­cial wizards who had be­come celebri­ties.

But his fall was as dra­matic as his rise—Jig­nesh, the feted wonderkid of the fi­nan­cial cap­i­tal of In­dia, sat be­fore a po­lice of­fi­cer, try­ing to prove his in­no­cence, shorn of his wit and


dar­ing while thou­sands of duped in­vestors seethed with anger.

Not only his halo, his for­tune too has taken a hit. Af­ter the po­lice probe into the op­er­a­tions of NSEL, the to­tal value of shares of par­ent com­pany

FTIL and its af­fil­i­ates plunged to $100 mil­lion at the end of Au­gust this year from their peak of $2 bil­lion.

What was his tragic flaw? Was Jig­nesh greedy or care­less or too con­fi­dent? The trou­ble, ac­cord­ing to mar­ket ex­perts who have ob­served him closely, lay in his ea­ger­ness to grow too big and too fast. Crit­ics say he was in a big hurry. Not only did it leave lit­tle time for due dili­gence, it also gave ex­ec­u­tives space and op­por­tu­nity for bend­ing rules.

In­vestors say timely ac­tion by the Gov­ern­ment could have saved many of them. “Had the Gov­ern­ment acted in April 2012, when MCA is­sued the first show-cause no­tice to NSEL, 80 per cent of in­vestors would have been saved,” says Ke­tan Shah, a duped in­vestor from Mum­bai. In­vestors such as him at­tribute the de­layed gov­ern­ment ac­tion to Jig­nesh’s prox­im­ity to in­flu­en­tial peo­ple.

Jig­nesh has re­fused to talk, cit­ing the on­go­ing in­ves­ti­ga­tions. Re­spond­ing to an email, an FTIL spokesper­son said that Jig­nesh, “as non-ex­ec­u­tive di­rec­tor of NSEL was not aware of any ‘il­le­gal ac­tiv­i­ties’ in NSEL, which he has cat­e­gor­i­cally pointed out to var­i­ous in­ves­ti­gat­ing au­thor­i­ties.”

A few bro­kers are will­ing to give Jig­nesh the ben­e­fit of doubt. “He is a tech­no­crat. He re­lied on peo­ple and those peo­ple had in­tegrity is­sues,” says Moti­lal Oswal, whose broking firm has an in­vest­ment of Rs 250 crore stuck in NSEL. But he agrees that Jig­nesh can­not run away from his re­spon­si­bil­ity for what hap­pened. “This is def­i­nitely a fail­ure of the man­age­ment.” Arun Dalmiya, Sec­re­tary of the NSEL In­vestors’ Fo­rum, al­leges that ev­ery­thing was done with the knowl­edge of the man­age­ment.

“The NSEL cri­sis has de­stroyed ev­ery­thing that I have worked hard to build over the past two decades,” Jig­nesh said in an emo­tional state­ment that an­nounced his res­ig­na­tion as the vice chair­man of MCX on Oc­to­ber 31. He might have been claimed by the very an­i­mal spir­its he un­leashed in the In­dian mar­ket. In­sid­ers say he is not the con­fi­dent and proud man he used to be. His body lan­guage is tame and his con­ver­sa­tion no longer has snatches of Bol­ly­wood di­a­logues. If an am­bi­tious Jig­nesh’s NSEL op­er­ated in a reg­u­la­tory vac­uum, the in­vestors too traded with sus­pended dis­be­lief. His fall, a sad foot­note in the story of In­dia’s eco­nomic resur­gence, is also a cau­tion­ary tale for en­trepreneurs, in­vestors as well as reg­u­la­tors.

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