The Securities and Exchange Board of India (SEBI) has slammed Brightcom Group, an ad-tech company based out of Hyderabad, for concealing information, non-compliance, and violating norms. 

Stating that the company has understated expenditures and overstated profits during the investigating period of 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,” SEBI said in its 77-page order on Thursday.

In its interim order, it has directed the promoters not to shed their stake and slapped show-cause notices on the company officials. It directed the company to come out with its responses in three weeks. It held Chairman and Managing Director Suresh Reddy and a other top officials responsible for the violations and overlaps.

Accounting violations

The SEBI initiated a forensic investigation of the company in 2022 to look into alleged violation of accounting and listing norms.

“The non-compliance with accounting standards by a listed company can have a significant impact on the interests of investors in the securities market,” it pointed out.

By all yardsticks, the accounting shenanigans (secret or dishonest attempts) and dubious accounting practices, which the company resorted to, were to mislead investors, it said.

It alleged that the promoter group has directly benefited by the manipulation of financial statements and allotment of preferential shares to 79 allottees and raised ₹836.38 crore in 2021-22.

This resulted in increasing their shareholding from 3.51 per cent to over 18.47 per cent after the start of the SEBI investigation speaks volumes of their intent to mislead and their brazen approach towards self-enrichment, it said.

“By offloading their shares in BGL throughout the investigation period and increasing their shareholding after the investigation period at a much lower price, the promoter group has directly benefitted from the violations.

‘Bending rules’

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

Considering that the scrip of BGL is currently trading at around ₹16, there is a real risk that the promoters may offload their shares and exit the company. “It is thus imperative that the promoters be prohibited from off-loading/disposing off their shareholding in the company,” it said.

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

 It said the company can ask for a personal appearance or can give a reply or raise objections to the points made in the order in 21 days.

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