SEBI on Tuesday issued an interim order against Brightcom Group (BGL), prohibiting Chairman and Chief Executive Officer Suresh Kumar Reddy and Chief Financial Officer Narayan Raju from holding directorships or key management positions in any listed company or its subsidiaries. In addition, Reddy’s is prohibited from directly or indirectly buying, selling or dealing in securities.
The regulator has banned 23 notified persons, including veteran investor Shankar Sharma, from directly or indirectly disposing of their stake in BGL.
The regulator ordered BGL to ensure that its statutory auditors, P Murali & Co and PCN & Associates and its past and present partners, do not engage with BGL or its subsidiaries pending further orders.
The matter concerns BGL’s non-compliance in priority allocations for the financial years 2020-21 and 2021-22. BGL had four warrants/shares preferential issues and raised Rs 8,677.78 crore from 82 rights issuers.
According to SEBI, BGL, through its subsidiaries, promoters and CMDs and other channel entities, finances these preferential issuances by round-trip or circuitous flow of funds to certain allocators. BGL submitted falsified bank account statements as documentary evidence to falsely claim to have received warrants and shared allotment application funds.
Sharma to acquire 1,50,00,000 Warrants for the financial year 2021-22 (subsequently converted into shares on March 9, 2022) at a nominal value of Rs 2 per warrant at a price of Rs 37.70 per share for a total consideration of at Rs 56.65 crore. However, SEBI’s findings revealed that BGL received only Rs 399.8 crore and did not receive the full share application funds from Sharma.
In June, SEBI fined Brightcom Group and its promoters a total of Rs 4 crore for violations of regulatory norms.
In April, the regulator issued an interim order and notice of cause against Brightcom Group and its directors, alleging accounting fraud involving the manipulation of the company’s financial statements from 2014-15 to 2019-20.