The selloff in shares of Brightcom Group continued Thursday with the penny stock hitting another 5% lower circuit.
The stock, which is also owned by market veteran Shankar Sharma, fell to ₹9.85 per share on the National Stock Exchange (NSE).
Brightcom Group has tanked 45% over the past month. The counter has cracked 66% on a year-to-date basis. The stock has lost 87% in the last one year.
With the latest decline in its stock price, the Hyderabad-based digital advertising company's market cap has slipped below ₹2,000 crore.
This comes days after the Securities and Exchange Board of India (SEBI) issued an interim order cum show cause notice against Brightcom Group and its directors for allegedly committing accounting fraud and manipulating the company's financial statements.
The market regulator said that 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.
These non-compliances have resulted in an understatement of expenditure and hence, overstatement of profits during each of the financial years during the investigation period, SEBI said, adding that the scale of 'fraud' is indeed large.
By all yardsticks, the 'accounting shenanigans and dubious accounting practices' were to mislead investors, the market watchdog said.
SEBI noted the company's promoter group has directly benefited as a result of the 'manipulation' of financial statements. In 2021-22, Brightcom Group made preferential allotment of equity shares to 79 allottees and raised ₹836.38 crore. SEBI said these allottees included four entities that subsequently became part of the promoter group. However, prior to the preferential allotment, the promoter group sold shares when the average price of the scrip was much higher than the effective allotment price.
"It is apparent that the abovementioned increase in shareholding by the promoters was achieved at price far below the prices at which the promoters had offloaded a large percentage of their shareholding through a purported pledge," SEBI said earlier this month.
It is clear that the promoter group entities, by offloading their shares in Brightcom Group throughout the investigation period and increasing their shareholding after the investigation period at a much lower price, have directly benefited themselves from the said violations, according to SEBI.
The market regulator alleged that the Brightcom group concealed the correct shareholding pattern during the investigation period, when the promoters were off-loading shares, thereby keeping public shareholders in the dark about a reduction in their shareholding.
"Thus, the picture that emerges is that of a corporate entity that does not hesitate to bend rules and give a rosy and distorted picture of its true self to investors to benefit its promoters. The fact that the promoters gave themselves preferential allotment of shares which led to them increasing their shareholding from 3.51 % to over 18.47 % after the start of the SEBI investigation speaks volumes of their intent to mislead and their brazen approach towards self-enrichment," said SEBI.
