The interim order has been passed against the company, Suresh Kumar Reddy, Vijay Kancharia, Yerradoddi Ramesh Reddy, and Y. Srinivasa Rao. Suresh Reddy and Kancharia are part of the promoter group, while Rao is the CFO.
The four individuals have been barred from selling, disposing off or diluting their shareholding in the company, directly or indirectly, until further orders.
Headquartered in Hyderabad, Brightcom is in the business of ad-tech, new media and digital advertising, and has subsidiaries and operations in various geographies, including the US, Israel, Latin America, Western Europe and Asia Pacific regions.
On receiving complaints about irregularities in the financial statements of the group, the regulatory watchdog initiated an investigation into the financials from the period 2014-15 to 2019-20.
SEBI found a number of deficiencies in the books of accounts and other information pertaining to the company’s foreign subsidiaries. The same mainly pertained to assets impaired in FY20 to the tune of Rs 868.30 crore.
Basis the investigations, SEBI found that the accounting policy followed by Brightcom Group led to overcapitalization of the intangible assets, which led to inflation of profits. Further, findings revealed that the scale of fraud is “indeed” large, the regulator said.
The noticees attempted to camouflage accounting entries in excess of Rs 1,280 crore during FY19 and FY20 to give a distorted picture of the company’s financial position.
“By all yardsticks, the accounting shenanigans and dubious accounting practices, which the noticees resorted to, was to mislead investors,” SEBI said.
Not only are the earnings numbers inflated, but the stock price too. Shares of the company have given a whopping 657% returns in the last 3 years.
Market veteran Shankar Sharma, held 1.24% stake in the company as of December end.
SEBI has directed the company to undertake an examination of its consolidated financial statements for the period 2014-15 to 2021-22 to ensure they are in compliance with all the applicable accounting standards.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)