Why Were Brightcom Group Shares Delisted and Other Updates

Brightcom Group shares have been suspended from trading on both the BSE and NSE for nearly 7 months ago due to non-compliance with the NSE’s master circular. The suspension, implemented on June 14, 2024, followed the company’s failure to declare quarterly earnings for two consecutive quarters—ending September 30, 2023, and December 31, 2023.

Although Brightcom partially addressed the compliance issue by announcing results for the September 2023 quarter and the first half of FY24, the company has yet to provide clarity on its December quarter earnings. According to the NSE, trading in Brightcom shares will remain suspended until compliance is achieved. Once reinstated, trading will be limited to a trade-for-trade basis or the “Z” category on the first trading day of every week for 6 months.

Financial Performance for September 2023

Brightcom Group’s financial performance for the September 2023 quarter reflected stagnation. Revenue remained flat at ₹112 crore, while EBITDA dropped significantly to ₹1 crore from ₹3.92 crore in the same quarter the previous year. Despite a marginal rise in net profit to ₹63 lakh (from ₹59 lakh YoY), the EBITDA margin shrank to 0.9% from 3.47% in the prior year.

Assurances on Trading Suspension Revocation

In its latest weekly update, Brightcom Group expressed confidence that the trading suspension will be revoked within January 2025. The company cited “highly constructive” discussions with the BSE’s revocation committee and emphasised its proactive efforts to meet all compliance requirements.

The main committee responsible for granting in-principle approval for revocation is expected to meet soon, with plans to finalise a site visit timeline. Brightcom stated that the remaining tasks are procedural, and no significant compliance issues are pending aside from routine reconciliations. A board meeting to adopt FY24’s financials has been scheduled for January 10, 2025.

Impact on Investors and SEBI’s Actions

The prolonged suspension has left over 6.5 lakh small investors unable to trade freely in Brightcom Group shares. Currently, the stock trades only in the “Z” category or on a trade-for-trade basis during the first trading day of the week.

Regulatory scrutiny of Brightcom Group intensified in February 2024 when SEBI issued a confirmatory order barring the company’s chairman and managing director, Suresh Kumar Reddy, from holding directorial positions and prohibiting the company from trading in securities. Earlier in 2022, SEBI accused the group of fund round-tripping and misrepresenting proceeds from preferential share allotments during FY19-21.

SEBI Allegations and Investigations

In October 2022, SEBI received complaints alleging that funds raised by Brightcom through preferential issues were funnelled to related entities and subsequently provided as loans to its subsidiaries. SEBI’s investigation revealed irregularities in the company’s practices, leading to interim orders against Reddy, Raju, Sharma, and 21 others.

What are ‘Z’ Category Stocks?

Stocks classified under the ‘Z’ category are those that have failed to comply with exchange listing requirements, have unresolved investor complaints, or have not made necessary arrangements with both depositories.

Meanwhile, stocks in the Trade-For-Trade category allow only delivery-based trades, with no intraday trading permitted. Investors looking to buy such stocks must have funds available for 100% delivery of the shares.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.