Sebi bars Securekloud, its directors from securities markets for up to 3 years

Stock market regulator Sebi has barred Securekloud Technologies Ltd (STL) and its directors from the securities markets for a period ranging from one to three years for allegedly misrepresenting the financials of the company. Sebi has slapped a total of ₹10 crore fines on the software firm and its director.

Sebi slapped a fine of ₹4 crore on STL, ₹3 crore on Venkatachari, ₹2 crore on Ramani, and ₹1 crore on Jayaraman, according to the order.

As per the official order, Sebi imposed a fine of ₹4 crore on STL, ₹3 crore on Venkatachari, ₹2 crore on Ramani, and ₹1 crore on Jayaraman. The deadline to pay the penalty is within 45 days, Sebi said in its final order.

The Sebi initiated an investigation into the affairs of the company after receiving several complaints alleging financial misreporting/irregularities by promoters and management of STL and the forensic audit report by Deloitte.

Sebi probed into the affairs of the company for the period covering the financial years 2017-18 to 2020-21.

In its probe, Sebi found that there was a misrepresentation of the financial statements of STL, the consolidated revenue of the firm rose manifold within a short period i.e from ₹271.93 crore in FY 2015-16 to ₹850.39 crore in FY 2018-19.

Also, once the STL stopped booking fictitious revenue (from 2019-20 onwards), its revenue decreased to ₹386.43 crore during FY 2019-20.

Besides, the Chennai-based company also inflated its balance sheet size by capitalizing fictitious expenditure towards the development of software, resulting in its balance sheet size increasing from ₹44.76 crore on March 31, 2013, to ₹997.99 crore as on March 31, 2019.

After impairment and other write-offs, the balance sheet size of the Company reduced from ₹997.99 crore to ₹242.82 crore in a single financial year, ₹755.17 crore was wiped off from the balance sheet of the company, as per the order.

"I note that Venakatachari being MD & CEO of STL published the manipulated financial statements of the company and the same to induce the investors to invest in the shares of the firm by siphoning ₹3.83 crore from the company and making personal gains by off-loading shares of the company when the price of the shares of STL was high," Sebi's Whole-Time Member Ananta Barua said.

Accordingly, Sebi directed STL to undertake the measures to bring back or recover ₹3.83 crore from Venkatachari within a period of one year.

In addition, Sebi observed that Ramani and Jayaraman being CFO and Chairman of the audit committee have been found complicit in misrepresentation in the books of accounts of STL by recognising fictitious revenue and expenses by the firm, thereby violating disclosure lapses.

"It found that STL did not disclose the information regarding initiation of a forensic audit by Sebi and incorporation of STL's foreign subsidiaries, to the stock exchanges thus, keeping the investors in dark about their wrongdoings," the order said.

(With PTI inputs)