Sebi’s confirmation order against Brightcom Group has barred the CMD from holding the position of director.
The company is also banned from trading in the stock market until further orders.
However, the regulator modified the directive by barring Chief Financial Officer Narayan Raju from holding the position of director or key executive only at Brightcom Group and its subsidiaries.
The regulator also revoked an order that had barred market veteran Shankar Sharma from disposing of the company’s shares.
In August last year, the capital markets watchdog had passed a second interim order against Reddy, Raju, Sharma and 21 other individuals for allegedly engaging in round-tripping of company funds to misrepresent receipt of proceeds through preferential allotment of shares. .
“What has become very clear is that the explanation provided in the notice has led SEBI to ask more questions about how Brightcom Group (BGL) operates and how it operates according to the whims and fancies of individuals. namely, Mr. Suresh Kumar Reddy,” Sebi said in its confirmation order. It is clear that the company’s internal financial controls were lax and that CMD was running the company in private hands. “CMD treated BGL as its own private enterprise and ignored the majority of public shareholders and their interests. There were no checks and balances within BGL on how financial transactions were recorded,” the regulator said.
background
In October 2022, Sebi received a complaint related to funds raised by Brightcom Group through preferential issue of shares/warrants during FY19-21.
Sebi claimed that Brightcom Group raised funds by preferentially issuing them to companies directly or indirectly linked to it, and that the raised funds were provided as loans and advances to its subsidiaries.
It was also alleged that adequate disclosure was not made in the company’s annual report regarding the use of proceeds from the issuance of preferred stock.
Brightcom Group issued preferential warrants/shares in four rounds and raised Rs 868 crore from a total of 82 allottees, including Shankar Sharma.
Sebi found discrepancies between the items in the statement provided by the bank and the statement provided by the company.
The company claimed to have received a total consideration of Rs 56.65 crore, but the entries in its bank accounts did not match.
The confirmation order could lead to a negative reaction on Dalal Street when trading resumes on Thursday. On Wednesday, the stock was down 2.2% at Rs 17.60 on the National Stock Exchange.
