Brightcom shares hit 5% lower circuit after Sebi's showcause notice on alleged fraud | Mint
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Business News/ Markets / Stock Markets/  Brightcom shares hit 5% lower circuit after Sebi's showcause notice on alleged fraud
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Brightcom shares hit 5% lower circuit after Sebi's showcause notice on alleged fraud

The stock has delivered multibagger returns to investors in the last three years

In the last one year, the shares of Brightcom have plunged 84 per cent. (Photo: Bloomberg)Premium
In the last one year, the shares of Brightcom have plunged 84 per cent. (Photo: Bloomberg)

Shares of Brightcom Group were stuck in the lower circuit of 5 per cent at 14.70 in Monday's trade on NSE after the Securities and Exchange Board of India (Sebi) served it with a show-cause notice, alleging major fraud in the company's financial statements.

At 1.15 pm, shares of Brightcom Group slipped 4.85 per cent to 14.70 on the NSE. The stock has dipped nearly 50 per cent on a year-to-date basis. In the last one year, the shares have plunged 84 per cent.

However, the stock of Brightcom has delivered multibagger returns of more than 600 per cent to investors in the last three years.

The capital markets regulator said that Brightcom overstated its profits for FY20 to the tune of 868.30 crore by understating expenditures by using irregular accounting practices.

“The scale of fraud is indeed large. The company attempted to camouflage accounting entries in excess of 1,280 crore during 2018-19 and 2019-20 to give a distorted picture of its financial position," said Sebi in its order.

Based on the probe, the markets regulator found that the accounting policy followed by Brightcom Group led to overcapitalisation of the intangible assets, which resulted in the inflation of profits.

It served a show-cause notice to the top executives of the company, including its Chairman and Managing Director Suresh Reddy.

Four individuals – Suresh Kumar Reddy, Vijay Kancharia, Yerradoddi Ramesh Reddy, and Y Srinivasa Rao – have been barred from selling, disposing of or diluting their shareholding in the company, directly or indirectly until further orders.

Sebi has also made observations on the company's shareholding pattern for promoter holdings in the period which, it feels, were not rightly reported. Some other observations on non-compliance were also issued.

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ABOUT THE AUTHOR
Meghna Sen
Business journalist tracking markets, companies, economy and crypto for Livemint. She has 6 years of experience with online and print publications. Email: meghnasen08@gmail.com
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Published: 17 Apr 2023, 01:29 PM IST
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