SEBI censures Brightcom Group for non-compliance with norms

SEBI censures Brightcom Group for non-compliance with norms

Restricts promoters from selling the stakes

The Securities and Exchange Board of India (SEBI) has slammed Brightcom Group for concealing information and violating regulatory norms.

The markets regulator stated that the Hyderabad-based ad-tech company understated expenditures and overstated profits during the investigating period. SEBI served a show-cause notice to the top executives of the company, including its chairman and managing director Suresh Reddy.

In its 77-page order, SEBI said, “The scale of fraud is indeed large. The company attempted to camouflage accounting entries in excess of Rs.1,280 crore during 2018-19 and 2019-20 to give a distorted picture of its financial position.”

In its interim order, SEBI directed the promoters not to sell their stake and slapped a show-cause notice on the company’s officials. Holding the top brass responsible for violations and overlap, it ordered them to respond to the notices within three weeks.

In 2022, SEBI initiated a forensic investigation of the company to look into the alleged violations of accounting and listing norms. It pointed out, “The non-compliance with accounting standards by a listed company can have a significant impact on the interests of the investors in the securities market.”

It added that by all yardsticks, the accounting shenanigans (secret or dishonest attempts) and dubious accounting practices, which the company resorted to, were to mislead the investors.

The market regulator further alleged that the promoter group had directly benefited from the manipulation of the financial statements and allotment of preferential shares to 79 allottees, and in 2021-22, raised Rs.836.38 crores.

This resulted in increasing their shareholding from 3.51 percent to over 18.47 percent. All this happening after SEBI’s investigation spoke volumes of their intent to mislead and their brazen approach towards self-enrichment.

It added, “The picture that emerges is that of a corporate entity that does not hesitate to bend the rules and give a rosy and distorted picture of its true self to investors to benefit its promoters.”

SEBI further stated, that considering that the scrip of the company was currently trading at around Rs.16, there was a real risk that the promoters may offload their shares and exit the company.

It ruled, “It is thus imperative that the promoters be prohibited from of-loading/disposing off their shareholding in the company.”

While directing the company to appoint one independent director, it asked the National Stock Exchange (NSE) to monitor the compliances vis-a-vis the directions given by the regulator.