The Securities and Exchange Board of India (SEBI) has issued a show-cause notice cum interim order against Brightcom Group Limited (BGL) and four individuals for accounting irregularities, manipulation in financial statements, and misreporting shareholding patterns, among other violations.

The noticees, Suresh Kumar Reddy, Vijay Kancharia, Yerradoddi Ramesh Reddy, and Y. Srinivasa Rao, have been prohibited from selling their shareholding in BGL through their family members or companies in which they or their family members are directors until further orders from SEBI.

The regulator has also directed BGL to examine its consolidated financial statements from 2014-15 to 2021-22 and ensure they comply with all applicable accounting standards. Within three months of the order, BGL must submit a statement of the impact of all non-compliances. BGL must also publish on stock exchange platforms, within seven days of the order, a statement showing the correct shareholding pattern for all quarters.

SEBI has asked BGL to appoint at least one independent director to its board of directors and each of its material subsidiaries within fifteen days. Furthermore, within fifteen days, the company must publish the standalone financial statements of each of its subsidiaries on its website between FY14-15 and FY21-22. In addition, BGL must ensure that, for quarterly consolidated financial results, at least 80% of each consolidated revenue, assets, and profits, respectively, is subjected to an audit or a limited review from the quarter ending March 31, 2023.

SEBI’s findings indicate several deficiencies in the books of accounts, and other information about BGL’s foreign subsidiaries was observed. Although BGL had recorded an impairment of Rs 863.80 crore in the consolidated financial statement for FY 2019-20, no impairment of assets was observed upon examining the financial statements of BGL.

According to the order, if the company had not resorted to accounting irregularities, its actual profits would have been significantly lower than the reported profits. During the investigation period, the promoters’ shareholding decreased from 40.45% to 3.51%, indicating that they offloaded shares at prices that were artificially propped up by showing higher profits. The incorrect shareholding pattern was also given in 31 quarters out of 34.