Brightcom Group shares in focus after Sebi order on CMD, CFO, Shankar Sharma

Shares of Brightcom Group Ltd (BGL) will be in focus in Wednesday's trade after Sebi in an interim order restrained the company's top executives Suresh Kumar Reddy and Narayan Raju from holding any directorial positions until further notice. Reddy is the promoter-cum-chairman and managing director of Brightcom Group, and Raju is the chief financial officer. The markets regulator also restrained ace investor Shankar Sharma from selling shares in the company. In total, a total of 25 entities and individuals will be hit by the Sebi order.

The order pertains to an investigation related to BGL's raising of money through preferential issue of shares to entities that were directly or indirectly connected to it. The money raised in the preferential issues was given as loans and advances to its subsidiaries. It was alleged that proper disclosures were not made in the annual report of the company in respect of utilisation of the proceeds of the preferential issue

Brightcom Group had in FY21 and FY22 issued warrants/shares on preferential basis on four occasions and raised Rs 867.78 crore from a total of 82 allottees. During its investigation, Sebi delved into the receipt of warrant/share application money from some of the preferential allottees. It was observed that in respect of 22 allottees who were allotted 25,76,50,000 equity shares for Rs 245.24 crore, the company had received only Rs.52.51 crore and the remaining amount of Rs.192.73 crore was either not received by the company or was routed back to the said allottees through multiple layering of transactions involving subsidiaries and conduits.

Sebi sought the Brightcom Group's bank account statements. On comparison of the bank account statements received from the company with those received directly from the banks, it was observed that the credit entries appearing in the bank account statements submitted by the company, which were purported to be the receipts of share application money from the said 4 LLPs, did not appear in the bank account statements obtained directly from the banks.

Sebi said Suresh Kumar Reddy has been restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders. Other noticees are also prohibited from disposing off shares of BGL held by them, directly or indirectly, in any manner whatsoever, until further order

Brightcom Group has been directed to ensure that P Murali & Co. and M/s PCN & Associates, including their past and present partners, are not engaged with Brightcom Group or its subsidiaries in any capacity or manner whatsoever, until further order.

Meanwhile, in the case of Shankar Sharma, he was allotted 1,50,00,000 warrants (subsequently converted into shares on March 09, 2022), with a face value of Rs 2 each, at Rs.37.70 per share during the financial year 2021-22, for a total consideration of Rs.56.65 crore. Brightcom Group claimed that it had received the total consideration of Rs 56.65 crore.

"However, even after repeated reminders, BGL failed to provide documentary evidence of receipts of warrant / share application money from Shankar Sharma in its bank accounts. It was observed that BGL had received Rs.25.7936 crore from Shankar Sharma. Subsequently, Sharma vide emails dated July 25 & 26, 2023, informed Sebi that he paid Rs.14.19 crore towards warrant application money to BGL’s HDFC Bank account. In this regard, he submitted copy of his bank account statement. However, in the said statements, all the particulars of the transaction, except the amount, were concealed by redaction. Due to the same, the above payment could not be verified and the same is still under examination," Sebi said.

Sebi said it appears that BGL has only received Rs.39.98 crore (including Rs.14.19 crore which could not be verified) as against total consideration due of Rs.56.6555 crore and has not received the entire share application money from Shankar Sharma and that BGL’s claims in this regard are false.

"Sebi has also repeatedly tried to obtain information and supporting documents from Shankar Sharma regarding payments made by him to BGL in respect of the warrants / shares allotted. However, Shankar Sharma is yet to provide complete information and documents to Sebi," it said.

Sebi raised concerns over the financial statements prepared by the company and various disclosures made by it on stock exchanges or in annual reports in the past after "BGL brazenly attempted to cover up its misdeeds by submitting forged and fabricated bank statements to Sebi."