Bhave, who now faces a CBI probe into Shah’s dealings, who had opened up this field. A couple of years earlier, as chief of National Securities Depository Limited (NSDL), he had made demat trading compulsory for traders. All physical shares had to be ‘extinguished’ and trades could happen only on the screen.
With the economy recovering, FTIL was one of the first movers. Shah secured a Rs 8 lakh software contract from the NSE, with a loan underwritten by a Rs 5 lakh mortgage raised on his home. His wife didn’t object. Shah is fond of recounting how they have known each other since childhood, and he decided to get married to her when he was just 8.
FTIL’s software ODIN would soon become the preferred platform for brokers. FTIL annual report for 2012 claimed 82 per cent of the brokers used it. In financial year 2013, FTIL’s turnover was Rs 3,592 crore, even after the crash.
Within two years of launching FTIL, Shah, who often said he modelled himself after Dhirubhai Ambani, realised the power of bringing brokers together on his platform. He jumped at the chance when, in 2002, the Ministry of Consumer Affairs and Agriculture sought expressions of interest from companies willing to set up a commodity futures market on the model of the NSE. Fourteen applications came, of which the ministry shortlisted four. While it is the Forward Markets Commission that is the sector regulator, it does not have the powers to grant a licence. Along with FTIL-sponsored MCX, NCDEX floated by the NSE, Ahmedabad-based NMCE and NBOT were given licences. The futures market was meant to create a mechanism to spot perishable products to help the government contain inflation.
FTIL wooed brokers to MCX as one of the conditions of the licence was that the firm should have a pan-India online network. It was on the other requirement — that the ownership of the exchanges be widely disbursed to protect the interests of investors — that Shah had his first brush with the law. Whenever he was required to divest his stake, he would turn around by issuing stock warrants to his promoter group in exchange. It was a sweetener giving them the option to buy the company stock in future at current prices.
Meanwhile, the UPA came to power, with Sharad Pawar as Minister for Consumer Affairs and Agriculture, and P Chidambaram as Finance Minister. In