The Securities and Exchange Board of India (Sebi) has cracked down fiercely on ad-tech and new-media company Brightcom Group Limited (BGL) through an order.
Brightcom Group has been facing flak from the market regulator for many of its corporate governance failures, which include non-disclosure of financial information and business transactions, among other serious omissions. The company, once a darling of millions of retail investors, saw its share price zoom up from barely Rs 4 in April 2021 to a high of Rs 118 in December 2021. On Thursday, at the end of the trading day, the scrip was trading at Rs 15.45.
"It is apparent that from September 30, 2014, the share price of BGL had generally declined over a period of time. Had the Company not resorted to accounting irregularities, the company’s actual profits would have been significantly lesser from the reported profits. Further, the assets and reserves would also be significantly different from what were disclosed in the balance sheet. The same would have led to a much steeper decline in the share prices," Sebi's Whole Time Member (WTM) Ashwani Bhatia said in the order.
The WTM added that the accounting irregularities, due to which the company could paint a rosy picture of its financials, "impacted the decision-making process for all stakeholders including public shareholders of BGL who were oblivious to such accounting irregularities."
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Meanwhile, the promoters’ shareholding in BGL has progressively decreased from 40.45 percent on March 31, 2014 to 13.96 percent on March 31, 2020 and further to 3.51 percent as on June 30, 2022. "The promoters thus offloaded shares at prices which were artificially propped up by showing higher profits through accounting irregularities," the Bhatia said in the order.
The company and its directors have been ordered to undertake the examination of its consolidated financial statements for the period 2014-15 to 2021-22 in order to ensure that they are in compliance with all the applicable accounting standards. The market regulator has issued this direction in light of the several non-compliances with the accounting standards as well as violations of disclosure norms by the company.
BGL has been directed to submit the statement of the impact of all the non-compliances noted including those observed in the order for each of the financial years within three months from the date of the order.
The company directors have also been ordered not to sell, dispose of or dilute their shareholding in the company.
BGL has also been ordered to disseminate the standalone financial statements of each of its subsidiaries on its website, for the period between FY 2014-15 and FY 2021-22, as required under Sebi (LODR) Regulations, 2015, within fifteen days. The company has also been ordered to ensure that, for the purposes of quarterly consolidated financial results, at least eighty percent of each of the consolidated revenue, assets and profits, respectively, is subjected to audit or in case of unaudited results, subjected to limited review starting from the quarter ending March 31, 2023.
Considering the gravity of the accounting compliance failures and corporate governance violations, the market regulator has directed the audit committee of BGL to file a report to the stock exchanges on the independence of the statutory auditor, and the effectiveness of the auditory process. The audit committee has also been directed to review the adequacy of the internal audit function of BGL and take suitable corrective action. The committee has been further mandated to enhance the oversight of BGL’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient, and credible.
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