sebi:WTM/AN/CFID/CFID_4/31187/2024-25

SEBI · SEBI · Ananth Narayan G., Whole Time Member

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Facts / Headnote

Directions and penalties imposed under sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act; Noticees 2 to 5 restrained from association with the securities market for specified periods

Provisions invoked

• s. 11B
• s. 11
• s. 24
• s. 11(4)
• s. 15A
• s. 12A
• s. 10
• s. 27
• s. 73
• s. 15J
• s. 15H
• s. 15F
• s. 21
• s. 23H
• s. 133
• s. 260
• s. 152
• s. 134(3)
• s. 2(77)
• s. 134

Regulations

• Reg. 3
• Reg. 4(1)
• Reg. 16
• Reg. 4(2)
• Reg. 4(2)(f)
• Reg. 34
• Reg. 3(c)
• Reg. 3(b)
• Reg. 201
• Reg. 30
• Reg. 3(d)
• Reg. 4(2)(r)
• Reg. 4(2)(k)
• Reg. 4
• Reg. 4(1)(a)
• Reg. 33
• Reg. 30(1)
• Reg. 3(5)
• Reg. 30(4)
• Reg. 48

Parties

• Brightcom Group Ltd. (Noticee 1)
• Noticee 2
• Noticee 3
• Noticee 4
• Mr. Y. Srinivasa Rao, CFO (Noticee 5)
• Mr. M. Suresh Kumar Reddy

Holding

BGL was found to have violated accounting standards (Ind AS 36, Ind AS 38, AS 26) and multiple provisions of the LODR Regulations, Listing Agreement, SCRA and PFUTP Regulations, resulting in egregious misrepresentation of financial statements for FYs 2014-15 to 2019-20 and artificial inflation of headline profits to the extent of INR 1,280.06 crore. Directions and penalties were issued under sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act, including restraint of Noticees 2 to 5 from association with the securities market.

Full text

Final order in the matter of Brightcom Group Ltd. Page 2 of 129 (a) BGL failed to carry out annual impairment testing for FYs 2016-17 to 2018-19 ... 38 (b) BGL recognized impairment of assets of INR 868.30 crores in FY 2019-20 under OCI in contravention of applicable accounting standards .......................................... 41 (c) BGL failed to disclose events and circumstances that led to impairment loss ...... 45 (ii) Impairment loss of investment in subsidiary amounting to INR 411.76 crores in FY 2018-19 ........................................................................................................................ 46 (a) BGL failed to recognize impairment loss in its standalone financial statement..... 49 (b) BGL recognized impairment of assets of INR 411.76 crores in FY 2018-19 under OCI in contravention of applicable accounting standards ............................................. 51 (c) BGL failed to disclose events and circumstances that led to impairment loss ...... 52 PART II: Other accounting standards violations ......................................................... 55 (i) Wrong capitalization of R&D costs as assets ........................................................... 55 (ii) Incorrect recognition of intangible assets ................................................................. 61 (2) Whether BGL has violated various other provisions of the Listing agreement/ LODR Regulations? .........................................................

Final order in the matter of Brightcom Group Ltd. Page 3 of 129 Role of Mr. Y. Srinivasa Rao (Noticee No. 5), CFO of BGL ................................. 111 Precedents relied upon by Noticees 2 to 5 .............................................................. 112 (4) Whether there was a violation of PFUTP Regulations? ................................... 115 (5) Whether issuance of directions and/ or penalty under sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act are warranted? ................................... 122 F. COMPLIANCE WITH DIRECTIONS OF INTERIM ORDER CUM SCN .................. 126 G.

Final order in the matter of Brightcom Group Ltd. Page 4 of 129 Pacific regions (25 office locations and 1700 employees and consultants). The Company is headquartered in Hyderabad, India. As per the Company’s Annual Report for the FY 2019- 20, it has 2 Indian subsidiaries and 14 overseas subsidiaries. The present promoters of the Company had taken over the erstwhile listed company, Lanco Global Systems Ltd., and amalgamated it with an unlisted company, Ybrant Digital Ltd., through a scheme of amalgamation approved by the Hon’ble High Court of Andhra Pradesh dated April 11, 2012. Pursuant to the same, the Company’s name was changed from "LGS Global Ltd.” to "Ybrant Digital Ltd." with effect from June 14, 2012. Later, the Company’s name was changed to “Lycos Internet Ltd.” with effect from October 07, 2014 and then to “Brightcom Group Ltd.” with effect from September 05, 2018.

Source: SecMarx — sebi:WTM/AN/CFID/CFID_4/31187/2024-25. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.