Brightcom Group shares news on CMD, CFO resignations; stock in focus after ED raids

Shares of Brightcom Group Ltd (BCG) may bleed on Monday morning after Chairman & Managing Director (CMD) Suresh Kumar Reddy, along with Chief Financial Officer (CFO) SL Narayana Raju resigned from the company with immediate effect following a Sebi order. The stock would also be in news after the ED said it conducted searches under the provisions of FEMA, 1999 at five locations in Hyderabad including the office of Brightcom Group, residences of company’s CEO and CFO, and premises of company’s auditor P Murali Mohana Rao.

ED initiated FEMA investigation on the basis of investigation being conducted by the Sebi regarding impairment of assets worth Rs 868.30 crore by Brightcom Group through its subsidiaries abroad.

ED said it enquiry revealed several violations of the provisions of FEMA, 1999 by Brightcom Group. It was revealed that Brightcom itself financed the preferential issues by roundtripping funds through subsidiaries and conduit entities; that Brightcom falsely claimed to have received full payment for preferential shares/warrants by providing ‘forged and fabricated bank statements’ to Sebi.

"It was further revealed that more than three hundred crore rupee advanced as loans to subsidiaries were partly siphoned off or remained unaccounted. The statutory auditors, M/s P Murali & Co. and M/s PCN & Associates (related entity of P Murali & Co.), apart from failing to report outright fraud, colluded with the management/promoters of the company," it said.

During the search, various incriminating documents, digital devices, unaccounted cash of Rs 3.30 crore and gold jewellery and bullion worth Rs 9.30 crore from the residence of auditor, P Murali Mohana Rao were recovered and seized, ED said.

Following this, the Brightcom Group told stock exchanges that it "received and acknowledged resignation letters from Suresh Reddy and Narayana Raju.

"The board acknowledged the need for regulatory compliance. Steps will be taken to engage with relevant regulatory bodies and ensure compliance with all applicable regulations during this transition period," it said.

Brightcom Group said a transition leadership team was proposed, with the responsibility of overseeing the leadership transition process. The BCG board also approved the commencement of a search for an CEO and an CFO to ensure the smooth continuation of essential operations.