June 7, 2020 at 2:40 am #6928LoganRegistered Boarder
A brief history of Brightcom Group
This thread is about some of the events that happened in Brightcom Group’s history. From these events we can try to value the company and analyze why the stock price fell.
(This may not be 100% accurate and anyone can correct me if I have mentioned something wrong)
Brightcom Group/Ybrant Digital/Lycos Internet was a private company for 12 years. They raised $ 100 Million (around Rs.750 crores now) from many Private Equity (PE) and Venture Capital (VC) frims. Some of those firms are Sansar Capital, Everest Capital, Oak India Investments, Passport Capital, Eight Capital and Venus Capital. Most of the firms were foreign companies.
Ybrant used that money to grow their business and also to buy other companies. They have bought many companies, some of them are ORIDIAN (Online Media Solutions),AdDynamix, Max Interactive, DreamAd Group, VoloMP, Lycos (you can refer the latest investors presentation for more details on the subsidiaries and the amount invested to buy them and also about the above PE and VC firms). All these subsidiaries are foreign companies.
Ybrant Digital was very well known outside India especially in the VC circles and I once read somewhere Mr.Reddy mentioning that they were not well known in India (they still are).
They used to raise money easily from the VCs and PEs. These firms knew how good Ybrant and Suresh were and that’s why they invested.
We should all know how these firms operate. They get to buy equity(stocks) in startup companies at cheap prices. They either invest in equity or debt(loans) and demand high interest if its debt or higher percentage if its equity. Since it was hard for startups to raise funds back then (nowadays startups can raise money easily) these VC and PE firms got great deals.
So coming to Ybrant, firms like Sansar Capital got equity at very lower prices. We should remember Yrant didn’t have much debt back then.
Ybrant wanted to go public in 2007 but cancelled the plans maybe because of recession (it is my guess only) then they planned again in 2010 after acquiring Lycos but not sure why they cancelled again.June 7, 2020 at 2:41 am #6929
All these years Ybrant’s growth was inorganic (they mostly grew by acquiring other companies). As we all know back then it was difficult for companies to come to stock market in India. So, Ybrant knew they were good at acquiring other companies and decided to acquire LGS Global and come to the markets directly without having to go through the IPO process. This was a reverse merger where LGS management would exit and Ybrant would take control of the company. Mr.Reddy said in an interview that this process took 12-18 months to get done and the LGS management was frustrated and were mentally checked out looking at this delay and they neglected to collect the receivables which were around Rs.150 crores. Now, many would think that this may not be a valid reason but as Ybrant already paid LGS Global their money it’s natural to assume LGS didn’t take things seriously. And finally when Ybrant got control they inherited debt of over Rs.150 crs (which had high interest on them) from LGS Global.
Ybrant’s debut on the market was taken well by all the investors, it’s price was Rs.95 and had a market cap of over Rs.4500 crores. The P/E ratio was 23.5 (EPS was 4.03 as mentioned above).
In FY 2011-12 Ybrant’s revenue was Rs.1297 cr, profit was 191 crores and EPS was 4.03.
In FY 2012-13 because of the write off, profits fell, revenue was Rs.1615 (24.5% growth) profit was Rs.50 cr (actual profits are over Rs.200 cr but they wrote off over Rs.150 crs) and EPS was 1.07.
People started dumping the shares when Ybrant announced the write off. The stock fell from Rs.95 to below Rs.3.
But after reporting high growth in their results every quarter, people started noticing their business and their high growth and started buying more and this made the stock to rise above Rs.60 levels. From 2014,the company started conference calls to improve communication with the shareholders.June 7, 2020 at 2:42 am #6930
They reported good results in FY 2013-14, revenue was Rs.1957 cr (3.6% growth) profit was Rs.220 cr (3.4 times increase, last year’s profit was reported as Rs.50 cr because of the write off but it was above Rs.200 cr) and EPS was 4.64.
During this time Mr.Reddy came on different TV channels and talked about the positives of the company and frequently mentioned that they are massively undervalued and they are looking for institutional investors and they are not getting value recognition in the market.
He also talked about listing the shares abroad for value recognition.
(Some of these interviews are available online, everyone can check them)
Even during the many conference calls he mentioned that they are not getting value recognition in the market and they are trying hard to look for long term investors (some of the conference call transcripts are available on the company’s website).
The company reported excellent results for FY 2014-15, Revenue was Rs.1957 cr ( 17% growth) but the profits shot up to Rs.342 cr ( 55% growth) mainly due to video ads and EPS was 7.19.
Michael Mauldin, the founder of Lycos and the genius behind it’s success came on Ybrant’s board as an independent director, mainly to advice the company. I think Mr.Reddy wanted everyone to know that their company has a famous person as a board member (why would Michael Mauldin come and advice the company if he knew they were fake?).
This was also the year when Ybrant launched Lycos LIFE products (Band and Ring). Though it got mixed to good reviews, the products were expensive and it failed commercially and they burnt cash.June 7, 2020 at 2:43 am #6931
In 2016 they tried to acquire Mysms from TriTelA Gmbh for $12 Million to get into cloud computing. It was supposed to be all stock deal. The deal got cancelled because of cross border transaction issues and since Mysms was held by a Hong Kong entity it was difficult (only this much information is available on that deal).
Though Daum and Ybrant had disputes regarding Lycos earlier, but in 2016, the courts had ordered Ybrant to pay Daum the remaining money or give up Lycos . Ybrant originally paid $20 million and they argued that the deal was for $36 million and they were supposed to pay only $ 16 million but Daum told the courts that the deal was for $ 54 million and Ybrant should pay $ 34 million.
The CEO,Mr.Reddy immediately declared bankruptcy (Chapter 11 in the US) of their subsidiary, Ybrant Media Acquisition,USA (this company was set up only to hold Lycos). There’s a law in the US that says Companies filed for bankruptcy(Chapter 11) need not pay the dues immediately. Mr.Reddy did this to take time and to renegotiate with Daum and tried to settle this matter later.
The market reacted negatively to this news and the stock got hammered.
Business wise there was no impact to the company, actually the business grew.
In FY 2015-16, the revenue was Rs.2255 (15% growth) profit was Rs.399 cr (16.6 % growth) and EPS was 8.39.
This was also the year “ Brightcom “ was launched. Everyone should know that Brightcom is a brand not a company. Brightcom brand is mainly used by ORIDIAN, Israel (Online Media Solutions, OMS) and other subsidiaries of Brightcom Group (Ybrant).
The company also declared 10 paisa dividend (may be he tried to calm the markets after Daum sell off).
This was also the year where there was a change in accounting standards. Companies used to follow Indian GAAP but it was changed to Ind-AS whose principles are closely based on international accounting system called IFRS. Ybrant (Lycos) appointed KPMG (one of the big 4 auditors) to advice on the transition.June 7, 2020 at 2:45 am #6932
Negotiations continued to happen between Ybrant and Daum throughout 2016 and also in 2017.
Brightcom brand was well received in the digital ad market and Brightcom was number 1 in Pixalate’s Top Video Seller Rankings internationally.
Ybrant’s subsidiary, Ybrant Media Acquisition, USA moved out of bankruptcy.
Ybrant was in discussion with White Oak for funds to grow the business and to pay off Daum. White Oak was supposed to give them $150 million (Rs.1000 cr). Don’t know whether it was equity or debt and since White Oak wanted a thorough audit of some of the subsidiaries of Ybrant and Online Media Solutions, OMS was one among them.
Ybrant appointed E&Y to conduct the audit.
The mistake Mr.Reddy made was announcing the deal publicly. When Daum got to know about the deal, they dragged White Oak to the court and subpoenaed them to reveal the details. Since White Oak wasn’t involved in the operations of the company, they backed off because they didn’t want to fight a legal case. Ybrant had talked to other potential investors about financing. But the subpoena made other potential investors to back off.
Coming to financials, in FY 2016-17 revenue was Rs.2451 cr (8.7% growth) profit was Rs.429 cr (7.5% growth) and EPS was 9.01.
The Lycos case with Daum dragged on and finally the courts ordered Ybrant to give up Lycos name and all its assets.
The company officially changed their name to Brightcom Group (BCG).
Coming to financials, revenue was Rs.2420 cr (slight decrease in revenue because Lycos financials were not included) profit was Rs.407 cr ( 5% fall ) and EPS was 8.55.June 7, 2020 at 2:47 am #6933
2019 – Present
Revenue was Rs.2577 cr (6.5% growth) profit was Rs.443 cr (8.8% growth) and EPS was 9.32.
Some interesting developments happened in the company.
* Brightcom and Daum agreed to settle Lycos dispute and there were negotiations on price and other legal matters.
* Brightcom planned to consolidate 12 of its subsidiaries and form an entity in the US.
* Brightcom wants to raise funds to grow the company and they appointed BDO Global to audit all their subsidiaries and advise them on the merger and to get receivable financing. They are doing it in the US because most of their business is done there and since they are very well known there, and the banks know their business well.
* Issued preferential shares at Rs.10 to raise Rs.31 cr to close off bank debt and to use the remaining amount for the operations of the company.
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