Brightcom Group Chairman & CEO, CFO Resign After SEBI Order

Digital marketing company Brightcom Group Ltd.’s Chairman & Managing Director Suresh Reddy and Chief Financial Officer Narayana Raju resigned following the Securities and Exchange Board of India’s (SEBI) order.

The development comes after India’s capital markets regulator last week barred Reddy and Raju from holding any key position in any listed company. SEBI’s interim order came following an investigation after allegations of irregularities in the preferential allotment of shares by the company.

SEBI had earlier received complaints, alleging that Brightcom in FY20 and FY21 raised money through preferential issue of shares to entities that were directly or indirectly connected to the company and that the money raised in the preferential issues was given as loans and advances to its subsidiaries, according to the regulator’s order.

It was also alleged that proper disclosures were not made in the Hyderabad-based company’s annual report related to utilization of the proceeds of the preferential issues, SEBI said.

In its order on 22 August, SEBI restrained Reddy and Raju from holding the position of a director or a key managerial personnel in any listed company or its subsidiaries until further orders. In addition, it also barred Reddy from buying, selling or dealing in securities, either directly or indirectly.

The regulator also prohibited several others from disposing off shares of Brightcom held by them, directly or indirectly, in any manner whatsoever, until further order. In addition, SEBI directed Brightcom to place the interim order before its board within seven days from the date of receipt of the order.

Brightcom, whose board met on 27 August, acknowledged the “need for regulatory compliance” and approved the resignations of Reddy and Raju.

The company said its board proposed a transition leadership team, with the responsibility of overseeing the transition process. The board also approved the commencement of a search for a CEO and CFO to ensure the smooth continuation of essential operations, it added.

“Steps will be taken to engage with relevant regulatory bodies and ensure compliance with all applicable regulations during this transition period,” Brightcom said in a stock exchange announcement.

Last week, India’s Directorate of Enforcement (ED) conducted searches at Brightcom’s office, residences of Reddy and Raju, as well as the residence and office of the company’s auditor P. Murali Mohana Rao under the provisions of Foreign Exchange Management Act (FEMA).

ED which initiated FEMA investigation on the basis of SEBI’s probe regarding impairment of assets worth 868.30 crore rupees ($105 million) by Brightcom through its subsidiaries abroad. ED said its enquiry revealed several violations of the provisions of FEMA by Brightcom.

Brightcom, formerly known as Lycos Internet Ltd., provides digital marketing services to direct marketers, brand advertisers, and marketing agencies, according to its website. The company’s clients include Airtel, British Airways, Coca-Cola, Hyundai Motors, ICICI Bank, ITC, ING, Lenovo and Maruti Suzuki.

Note: $1 = 82.5307 Indian rupee

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