Demand for demat a/cs soars

MUMBAI: In an interview to this newspaper on Monday, Anil Ambani spoke of a broker who had jokingly called him ‘Demat Jockey’ — jockey in Gujarat being people who write examinations on behalf of real candidates. The broker couldn’t have been more precise. Close to two years after SEBI first unearthed the IPO scam and the process of opening demat accounts became stricter, demand for opening such accounts is soaring again. While some analysts are attributing the phenomenal rise to genuine interest in the Reliance Power IPO, others claim that brokers are merely hiring demat accounts for booking listing gains in the IPO. According to grey market sources, investors who already have demat accounts are being paid Rs 8,000 for ‘renting’ out their demat accounts. Under this arrangement, grey market brokers offer Rs 8,000 to a demat account holder, who then applies in the retail investor quota for Rs 1 lakh worth of shares. In fact, this commission is usually irrespective of whether listing gains are made or not. This investor signs a delivery instruction slip authorising transfer of shares from his account into that of his broker, and this transaction is effected on the day of the listing. The only difference between this arrangement and that used in the IPO scam is that these applications are not ‘benami.’ Demat accounts belong to actual people and not in the name of fictitious entities, as SEBI found was the case in the IPO scam. Reliance Power shares are already quoting a premium of Rs 400-420 in the grey market and hence the grey market operator is likely to realise a return of around 80% on his investment, even after paying the “rental charge” of Rs 8,000. Broking houses and banks have been falling over each other to lend money for investing in IPOs and this had led to a pick up in the pace of growth in demat accounts over the past few months. Overall bullishness in the market firing up stocks across the board, has also contributed to this trend. But depository officials said this level of frenetic demand is almost unprecedented. “If a male member in the family already has a demat account, he is opening another in the name of his wife and children,” said an official at a depository. India has two depositories (those that store stocks in the electronic form). Of the approximately 1.10 crore demat accounts, around two-thirds are with NSDL and the rest with CDSL.