Areas of Improvement

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  • #7202
    Saul Goodman
    Registered Boarder

    1>

    Hi everyone, in this article I’ll be discussing how BCG can improve their corporate governance. These are my suggestions and also everyone can give their suggestions so that we all can discuss and talk to the management about these. This thread is not for asking critical questions, there’s a separate thread for that.

    And everyone should know that in this article I criticize the company on few things and that doesn’t mean I’ve suddenly turned negative on the company and asking everyone to sell their shares. Whatever criticism I’ve made in this article are constructive criticisms.

    I’m discussing all these because next week we may have conference call and thought it would be good to discuss all these and demand the management to make few changes. Making these changes will change the market sentiment about the company and bring confidence to the investors.
    (not just this article but all my articles should not be taken for buy or sell decisions).

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    #7203
    Saul Goodman
    Registered Boarder
    Topic Author

    2n

    My suggestions to the management are :

    1) Bring Someone With Market Experience on Board.

    We know that the CEO, Mr Suresh Reddy is very talented. He has great knowledge and has vast experience in digital marketing and other fields. But what he lacks is expertise on how to run a public company. Even though BCG grew all these years, the share price nowhere represents BCG’s current and future value. This is mainly because BCG team still has the mentality of a Private Company.

    Mr Reddy,is an engineer, thinks about business like how an engineer would. But as we know most of the engineers look at ways to improve the business and they won’t concentrate much about the markets. Google, Amazon, Microsoft, Apple, General Motors, Tesla etc. all have engineers as CEO and have grown to great heights.

    These companies’ CEOs can concentrate more on improving the business and less on the markets (stock market not business market) because they have teams dedicated for investor relations. With BCG, Mr Reddy has to do both. He’ll need someone to share his burdens.

    Mr Reddy is great in handling the business as CEO but he thinks that if they concentrate on business and grow well, market will recognize that and value the stock accordingly. That is good for private companies, but public companies should always please the investors frequently, they should communicate well with the investors, ask for feedback on how they can improve their business, corporate governance and few other things.

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    #7204
    Saul Goodman
    Registered Boarder
    Topic Author

    3n

    All these take time and efforts and the CEO may not have sufficient time to do all these on his own. However, appointing some person who has market experience can make it easy for the CEO. If we see the current board of directors, no one is experienced in markets. And that maybe the reason why all these years BCG traded so low. There’s no one on the board to advise Mr Reddy to take right decisions on markets.

    They can appoint a board member for this or take in someone as a full time employee.

    If the management had appointed someone earlier then they could’ve stopped VC and PE firms selling the shares in the open market. That person would have advised the CEO well.

    I don’t know why they haven’t appointed anyone with market experience till now, even if they have then that person hasn’t done his/her job well all these years.

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    #7205
    Saul Goodman
    Registered Boarder
    Topic Author

    4n

    2) Improve Communication With the Investors

    The company never replies to our mails. I have sent many mails and the company hasn’t responded to any of those. And I have not asked queries on price or sensitive information. I have suggested few things for the company to improve their communication with the investors. This is not the way to treat shareholders.

    I know that many people will start sending mails to the company asking why price fell that day or they ask whether the company’s profits are fake and few other lame questions. But that doesn’t mean they have to ignore all investors’ mails. Some maybe genuine and if they take those advise then they (the company) are the ones who will get proper recognition in the market.

    Yes, the CEO answers each and every questions in the conference calls. Some questions will be very lame and stupid but he still answers patiently. But the problem is not everyone will get the chance to ask questions in the conference calls. And also we can’t travel to Hyderabad just to get clarifications on certain points.

    Their investor relations department is horrible. The company should immediately fire the person who is handling the investor relations and replace him/her with someone new.

    The CEO always says that they’ll improve communications with investors but till now that has not happened. If the company wants to get proper valuation and recognition then they must respond to investors.

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    #7206
    Saul Goodman
    Registered Boarder
    Topic Author

    5n

    3) Give More Details on Subsidiaries

    BCG has 16 or more active subsidiaries, among them 12 are foreign companies. We need to see annual report of at least one of the subsidiaries. Mr Reddy has said many times that EY has audited BCG’s Israeli subsidiary ORIDIAN (Online Media Solutions). We should ask the company to share ORIDIAN’s annual report with us. Let them put up ORIDIAN’s annual report on their website.

    I don’t understand what they will lose if they share it. As far as I know, annual reports won’t have sensitive information mentioned in them. We need to see EY’s signature on ORIDIAN’s annual report. Doing just this will increase shareholders’ confidence so much and shut naysayers down.

    If market sees EYs signature on the financials then the sentiment will change immediately. And also as shareholders we have the right to ask that information. The company has shared subsidiaries’ numbers but as I mentioned above we need to see at least one company’s annual report (preferably ORIDIAN’s).

    Some shareholders will trust the management but not everyone will. Sharing details on subsidiaries will help potential investors who want more details and also analysts who are tracking the company. We are not asking the company to share any sensitive information that may harm the company’s business.

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    #7207
    Saul Goodman
    Registered Boarder
    Topic Author

    6n

    4) Give More Details on Few Items in the Balance Sheet

    The company doesn’t provide proper details on few items in the balance sheet. There are many items that are labelled as “Other” on balance sheet. We don’t know what constitutes those assets. And also they haven’t given proper details on loans and advances in the annual report.

    Our Indian Accounting Standards ask companies to put many items under “Other” label, even the big companies report many items under “other” assets or “other” liabilities.

    Though they explain the details during the conference call when asked, only a few investors attend the calls.

    If any person calls or sends them mail asking for details, they won’t respond. Then how are we supposed to know what those items are?

    We should demand them to explain all those items properly in the annual report. They should mention everything in detail in the footnotes.

    This way not only current investors get proper information, it’ll also help analysts and potential investors tracking the company.

    All the big companies also put many items under “Other” label but they give proper details in the footnotes but BCG has not given proper details.

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    #7208
    Saul Goodman
    Registered Boarder
    Topic Author

    7n

    5) Disclose Promoter and Management’s Salary

    These days the company is not providing details on promoters’ salary. At first they used to provide the details.

    When asked in conference call, Mr Reddy said that the promoters’ take Rs.36 lakhs annually. I don’t understand what problems they have mentioning the salary in the annual report.

    We should insist that they provide the information in this year’s annual report. Many people mention this on certain boards and criticize the management because of this and they are not wrong on this. They maybe are wrong in many others things but disclosing promoters’ salary is a must.

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    #7209
    Saul Goodman
    Registered Boarder
    Topic Author

    8n

    6) CEO’s attitude

    There’s no doubt that the CEO, Mr Reddy is talented. He’s very humble and deserves our respect. However, he should improve in many areas.

    He always gives timeline and won’t execute within that time. I know it’s not easy to run a company of BCG’s size but what we want is for him to stop giving timelines, many retail investors will pressure him to give timelines but he should give only if he can execute.

    Also Retail investors should stop putting pressure on the CEO. There are many events in which he won’t have any control, events like the COVID-19 pandemic. If DAUM had not filed a case, BCG would’ve paid off the debt long back. They conserved the cash to pay DAUM but people didn’t understand this.

    Now, if there was no pandemic then BCG would’ve settled the case with DAUM. I think getting LOC was delayed because many countries were under lockdown for many months. There are problems with logistics, since BCG has many offices all across the globe, we can understand the delay in announcing the results.

    My suggestion for him is to give reasonable timeline or not give any timeline at all. Let him announce the updates once they are done.

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    #7210
    Saul Goodman
    Registered Boarder
    Topic Author

    9n

    7) Promote the Company more

    We can see many companies promoting their business on mediums like TV channels, Social Media. Mr Reddy used to appear on few channels 5-6 years back but since DAUM case he has stopped appearing on TV channels.

    On Social Media too the company rarely promotes their business, only Brightcom Global shares few information and that too not often. We can see smaller companies like Subex updating everyday on the developments happening in the industry.

    BCG is in a great industry and they can share interesting developments happening in the industry. That way more people will be interested in them and that will get the attention of institutions and mutual funds and also it will educate many people who want to know more about the company and the industry.

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    #7211
    Saul Goodman
    Registered Boarder
    Topic Author

    10n

    8) Appoint a Big Auditing Firm to audit the India business i.e. to audit the parent company.

    Everyone should know that BCG has not appointed BDO Global to audit the parent company. They have appointed BDO Global to audit all their subsidiaries. This is a big step in improving the corporate governance.

    However we should know that these big auditors charge more fees than the regular auditors. Appointing a big auditor right away when there are many issues pending won’t be ideal. They can appoint a big auditor after resolving all the issues.

    By doing this BCG can shut the naysayers who say that the numbers are fake. This will increase the confidence in investors and attract many big institutions and analysts.

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    #7212
    Saul Goodman
    Registered Boarder
    Topic Author

    11n

    If the company takes these suggestions seriously and does whatever is mentioned in this article accordingly then surely market perception about the company will change. All these are not difficult to execute and don’t require more time either.

    I have been sending these suggestions many times but as mentioned above I haven’t got any reply from them till now.

    What we have do is, we should prepare a set of critical questions that we need to ask the management and each and every person on this forum should send mails containing the same questions. That way the company will notice and they will try to execute them and won’t give excuses.

    I will share those questions with everyone before the conference call and we all can discuss and add few more questions to that list.

    We should support the management but at the same time we should be critical too. Time has come for the management to improve their corporate governance and they can’t give excuses this time.

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    #7213
    admin
    Keymaster

    Thanks Saul, this just looks brilliant.

    The forum now has a more balanced viewpoint along with a separate topic on Critical questions. By constructive criticism, I hope these articles get the required mileage in improving the corporate governance. If that happens it will immensely benefit the company as well as its shareholders in the long run.

    Thank you again for your time!

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    #7236
    odysee
    Registered Boarder

    A very articulate rendering of incisive and thought provoking points by Saul. It would be in the interest of all stakeholders, and especially Mr Reddy and his his fellow promoters, for the Board of Directors to seriously reflect upon and consider the suggestions being put forth in such an objective and orderly manner. Given the current propensity of the management to respond positively to shareholder concerns, I am confident that there will be active and meaningful consideration of these important suggestions by Mr Reddy and his team.

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    #7240
    Saul Goodman
    Registered Boarder
    Topic Author

    Thank you @odysee.

    Please post your suggestions also so that we can prepare questions to ask the CEO in the conference call.

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    #7242
    pranil
    Registered Boarder

    * Clarity on Area of investment and expectations from investment

    Our company invested hoping 1340 cr rs ( more than twice if it’s market cap) in business in last 5 years. And every year investment amount is growing. In view of this we want to understanding where these investments are made and what is expected returns with timeframe.

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    #7243
    kmr003
    Registered Boarder

    @SaulGoodman ,@admin pls consider below questions

    Shareholding pattern/holdings restructuring
    1) BCG should work on bringing FII and institution investors to acquire some stake in company.
    BCG actions in this ?

    2)Analyst meeting, and publish who are attending analyst meet.

    3) AI and MI projects update
    In terms of revenue and growth

    thanks

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