Sebi cracks down on Brightcom Group for accounting irregularities Apextalk

The market regulator Securities and Exchange Board of India (Sebi) has cracked down on ad-tech and new-media company Brightcom Group Limited (BGL) through an order for non-compliance, and violating norms.

The market regulator said that the Brightcom Group, headquartered in Hyderabad has understated expenditures and overstated profits after Sebi had initiated an investigation into the financials from the period 2014-15 to 2019-20.

It served a show-cause notice on the top executives of the company, including its Chairman and Managing Director Suresh Reddy.

“The scale of fraud is indeed large. The company attempted to camouflage accounting entries in excess of 1,280 crore during 2018-19 and 2019-20 to give a distorted picture of its financial position,” said Sebi in its order.

The promoters’ shareholding in BGL has progressively decreased from 40.45 percent on March 31, 2014 to 13.96 percent on March 31, 2020 and further to 3.51 percent as on June 30, 2022.

During FY 2021-22, the company had made preferential allotment of equity shares to 79 allottees and raised 836.38 crores. 

“Such allottees included 4 entities which subsequently became part of promoter Group. By virtue of the same, the shareholding of the promoters and promoter group of the Company now stands at 18.47%,as on December 31, 2022. The abovementioned preferential allotment was done at Rs.7.70 per share (face value of each share was Rs.2).  Subsequently, there were two bonus issues in the ratio of 1:4 and 2:3 during FY 2021-22, as a result of which the effective allotment for the preferential allottees came to Rs.3.70(approx.)per share,” said Sebi in its order.

Sebi said that the the promoter group of the company has directly ‘benefitted as a result of manipulation of financial statements.’

“However, prior to the abovementioned preferential allotment, the promoter group had sold shares when the average price of the scrip was much higher than the effective allotment price. Considering the same, it is apparent that the abovementioned increase in shareholding by the promoters was achieved at price far below the prices at which the promoters had offloaded a large percentage of their shareholding through a purported pledge,” it said.

The company and its directors have been ordered to undertake the examination of its consolidated financial statements for the period 2014-15 to 2021-22 in order to ensure that they are in compliance with all the applicable accounting standards. 

Sebi has issued this direction in light of the several non-compliances with the accounting standards as well as violations of disclosure norms by the company.

The company has also been ordered to disseminate the standalone financial statements of each of its subsidiaries on its website, for the period between FY 2014-15 and FY 2021-22, as required under Sebi (LODR) Regulations, 2015, within fifteen days.

Brightcom Group saw its share price zoom up from barely 4 in April 2021 to a high of 118 in December 2021. On Thursday, at the end of the trading day, the scrip was trading at 15.45.

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