Brightcom Group shares extend losses for third straight day, hit 5% lower circuit after SEBI crackdown

Shares of Brightcom Group Ltd (BGL) hit a 5 per cent lower circuit on Friday, extending the losing streak for the third straight session after the Securities and Exchange Board of India (Sebi) barred its CEO and CFO from holding any managerial positions in the company. The market regulator issued an interim order on Tuesday, August 22, 2023, after finding lapses in Brightcom Group’s preferential issue of shares.

Brightcom Group Ltd shares are under radar amid the Sebi probe into the alleged financial irregularities running into hundreds of crores. Shares of Brightcom Group hit a 5 per cent lower circuit at Rs 20.85 apiece on the BSE on Friday. The stock has plunged 16 per cent in the last four sessions since Tuesday, August 22.

SEBI also restrained 23 entities, including promoter group entities, from disposing of BGL shares held by them.

The Enforcement Directorate (ED) also conducted a series of raids on Wednesday at the premises of Brightcom Group’s promoters and its auditors. The operation, which unfolded across multiple locations, revealed a cash haul of Rs 3 crore from the residence of the firm’s auditor P Murali Mohan Rao.

SEBI probes into financial irregularities by Brightcom Group

The market regulator issued an interim order at the Sebi on August 22 after finding substantial irregularities in accounting and financial statements running into hundreds of crores within BGL.

The investigation conducted by Sebi unveiled manipulative practices surrounding BGL's preferential allotments. As part of the interim order-cum-show cause notice dated April 13, Sebi had previously alerted BGL promoters to address these concerns. Sebi's investigation focused on the receipt of warrant/share application money from specific preferential allottees. Notably, out of 22 allottees who were allotted 25,76,50,000 equity shares worth Rs 245.24 crore, the company received only Rs 52.51 crore. The remaining amount of Rs 192.73 crore either had not been received by the company or was redirected back to the allottees.

Amid the growing turmoil, Brightcom Group has scheduled a crucial board meeting for August 27 to deliberate on the ramifications of Sebi's interim order issued on August 22. The primary focus of the meeting will be to formulate a strategic response to the interim order's implications. The company reassured its investors that it would provide comprehensive updates after the meeting, underscoring the significance of the situation.

Suresh Kumar Reddy and Narayan Raju, key executives at Brightcom Group, have been barred by Sebi from holding any directorial positions until further notice. Furthermore, prominent investor Shankar Sharma has also been restrained from offloading shares in the company. This Sebi order impacts a total of 25 entities and individuals associated with Brightcom Group.