[vgsatwork]

I tend to agree with Logan when he says that if SKR wanted to raise his stake, he could have done the same in the last couple of years and need not have waited till now to try and have the stocks allotted to his B team @7.7. If I take a step back and see the entire chain of events, Oak wanted an Exit and an institution was to pick up that stake. It never happened, instead we had seen a stream of news flows including Consolidation of all subsidiaries under one umbrella company, LOC, BDO audit,Daum settlement, Loan closure, PO to Muskaan,Analyst meet, company presentations, etc,. Eventually when Oak exited fully, the news flows stopped or the developments surrounding these news events have completely stalled – be it LOC, Daum, Axis loan, Consolidation of subsidiaries, etc,. But the net result is that Oak got the exit it wanted and Muskaan ended up holding roughly the same amount of shares that Oak had by Q3 FY20.

Few months down the line we have been told all of a sudden that company is raising 265 crores through preferential warrants and this time not much of a news flow and over the next 1 months amidst heavy trading, the net result seems to be Exit of G gang. Once the SHP has been announced, the daily trade volumes have come down significantly..

I am beginning to think that the entire PW is a charade and the warrants would not be issued – may be disapproval from exchanges or may be some other last minute financing arrangements for the required capital and company would change it’s mind and inform the exchanges and investors accordingly. My guess is that News flows from last 1+ year was to ensure certain set of large shareholders get an exit and a group of entities who act in concert with promotors have been created. If you look at the AGM voting, you don’t see enough NO for PW issue’s that corresponds to G gangs known holding, which suggests that the Gang was Out before the book closure date of 21st Dec itself giving the promotors clear edge. If you closely look at the voting results, even amongst the promotors, there was no unity in terms of their voting when it comes to PW allotment. That speaks volumes..

But what could be the end game? – Not sure. But the promotors are trying to create a group which would not be part of promoters, neither have a board representation, but would always act in concert with Promotors.

[Myshport]

Reference #10197 regarding the complaint to SEBI.

In all earlier cases, SEBI sent the complaint to the concerned company for its comments and no further action was taken by SEBI. There have been numerous cases in the past where complaints were raised by the shareholders and, instead of investigating SEBI just forwarded the complaint to the company.

It is a very sad state of affairs that the Brightcom Group lacks proper Corporate Governance.

We will have to request the group of investors, who reside in Hyderabad, to take up the Corporate Governance issues with the management during their next meeting with SKR.

[VALUEBUYER001]

One SEBI 6000+ companies, it can only email to company. That itself is difficult with limited staff

[nitin_asce]

@logan see the question here is does thr borrower has capacity to pay or not. So ots is made when borrower does not have capacity to pay.

Generally these agreements have time frame and bankers do allow some additional time to pay if borrower is really facing financial crunch.

But in this case how BCG will justify financial crunch. The other thing if time has passed legally previous ots agreement is null and void.

Judges in nclt will try utmost best so that both parties can themselves arrive at sgreement as this is best solution.

[Logan]

Thanks for the reply @nitin_asce.

Could that be the reason he didn’t want the LOC to come to the parent company? If it came to the parent then Axis could’ve blocked it till the matter was closed?

So maybe that’s why they didn’t concentrate on the standalone business all these years, if they showed profits then he’d have to pay more to the banks. Now since they are settling with Axis he can start concentrating on the standalone business again and maybe that’s why he’s raising funds? Maybe acquire that company Tryan where Mr.Pisipathi is the CEO. He did say that Mr.Pisipathi is working on a hardware related project and because of the pandemic they are taking it slowly. It’s an agritech company.

Also, what if both parties don’t come at an agreement? What happens then? In many other cases they end up liquidating the company right? Will the same happen here or will the judges order BCG to pay that 41crs with some penalty?

If he didn’t want to show cash then why is he raising PW money? Axis can block that also right?

Sorry for asking these many questions.

[vgsatwork]

@Logan

Agree with your views that BCG might be trying to focus on growing standalone business(since the market currently valuing the BCG primarily based on the audited numbers of standalone business) once the Axis loan is closed so that banks would not claim full loan amount instead of OTS money. But he has been having the 31 crore from PO that he could have used and settled it Axis immediately (moreover Axis also has freezed it to ensure that the 31 crore does not get utilised for any other purpose other than to clear their OTS), but he has not done that. Also, he has opened up the talk of additional 265 crore coming into the company through PW. May be Axis is not agreeing to settle for 31 crore OTS and demanding full loan amount to be cleared looking at the news flows of the past 1+ years.If that is the case, then need for additional fund of 265 crore makes sense.They can pay off Axis their full loan amount and use the rest for their growth plan without getting debt on their standalone business books.
Again, easier way would have been to take loan from subsidiary and close the Axis loan and then with a clean books, raise LOC for their overseas business and raise equity through preferential route to an institutional investor for the new growth area that they are targetting for in their standalone business..

[nitin_asce]

@logan this can be a reason. But we won’t be knowing. The only issue is mr reddy don’t want to pay say 35 cr to axis.

I give you an example reliance factory was damaged in the early years. Experts claimed it will take 6 months to restart it. Mr Ambani directed his employees that he want it in 20 days and they can spend money on charter plane also to bring equipment and no questions will be asked. The factory started on 22nd day if I recollect correctly. They might have spent twice amount in refurbishment of factory but earned much more in next 6 months by running the factory. However here I think brightcom is behaving just the opposite of what Mr Ambani did. For just saving 25 cr they have kept share price languishing. Suppose they have paid 35 cr to axis, and then alloted the warrants the amount raised would have been many times more.

On standalone business I think it provides services to subsidiaries and hence done on cost plus basis. They can anytime increase cost of services and move money from subsidiaries. That’s pretty easy stuff.

I think nclt is just bargaining tactics by both parties. Do we think mr reddy will let go of bcg for 35 cr rupees and that zlso company has to pay and is not coming from his own pocket. When you analyze the situation we will make conclusion of what is going on.

[nitin_asce]

@logan My judgement says there is a very good compelling reason for warrants otherwise no promoters would like to dilute there shareholding.
I don’t see any example of such dilution in share market. I still think but not sure that this is a backup plan.

Rest I do believe in technical skills on mr skr like lycos life. He is investing in agritek and I have read article like mr bill gates, Elon musk etc several of them has bought lakes of acres of farm land and are still buying. Still not sble to connect the dots but there seems to be a very strong correlation these intelligent people are able to see and common man like us are not able to understand.

Do let us know if you come across any further article on this topic.

[VALUEBUYER001]

Bcg dragged axis just to just to allot PW to proxies @;one one eighth of book value.they can close daum in a day, but only after their pockets filled with pw. After their goals are achieved axis, daum are a days job, which the peon of BCG will complete in less than sn hour.

[Logan]

Thanks @vgsatwork and @nitin_asce for sharing your opinions with us.

@nitin_asce, as they say, “being too early is the same as being wrong.” With Lycos Life, BCG was quite early compared to many companies (not earlier when compared to FitBit etc). If you see now, almost everyone has a smart watch and that trend has accelerated because of the pandemic. Everyone wants to stay healthy and smart watches helps a lot in that. If the company had launched it a few years later then we could’ve seen good growth rates in that.

The same case in the stock market too. Back in 2012, when BCG came to the market, everyone wasn’t that interested in tech companies as they are now. Back then BCG had great growth rates but that didn’t reflect on the stock price. Imagine where the price would be if BCG had come to the market in the last 2 years and if it had the growth rates like it did in the 2010-16 period. Even the issues wouldn’t have impacted that much. Affle came to the market at a great time. Same with TTD but Criteo, Rubicon Project, RocketFuel etc came too early and went unnoticed for a longer period of time. Obviously growth rates do matter but now the market is highly valuing all the technology companies even if those companies don’t have good growth rates.

Sometimes being early is good too. In the online advertising field they were early compared to many others and that helped the company a lot. They bought OMS, Israel for just 50-60crs back in 2007-08 and now its making more than 1000crs revenue and profits are little over 200crs. BCG is getting 4 times profits what it paid for in a single year. If anyone wants to buy OMS now, they should be ready to pay 5k to 10k crores at least. OMS is profitable and if it is given some liquidity it’ll have great growth rates too.

Pubmatic with revenues of $120M or little more (with revenue growth rate of 14-15%) is trading at $1.80B valuation. That’s 15 times the revenue so OMS can easily get valuation of 5-10 times revenue. Magnite Inc now is trading at 20+ times revenue. When it was trading at 3-4 times revenue, Motley Fool website said Magnite is undervalued. We have BCG trading at 0.13 times the revenue and the market is completely ignoring it.

So whatever decisions the management takes, we should just hope that it’ll benefit us in the short and long terms. AI is growing like crazy and all the companies are investing heavily in that. If you don’t invest in that then you’ll end up missing out on the opportunities and the business may go down but if you do invest in that there’s no guarantee that it’ll result in growth of the business. It may end up like Lycos Life or it may end up like online advertising. Nobody knows what will happen.

[Logan]

See this interesting thing about fate :

1998 : Yahoo refuses to buy Google for $1M (maybe 5crs)
2002 : Yahoo realizes its mistake and tries to buy Google for $3B (20-25k crs). Google wants $5B (30-40k crs). Yahoo says no
2008 : Yahoo refuses to be sold to Microsoft for $40B (3lakh crs)
2016 : Yahoo sold for $4.6B to Verizon
Now Google is valued at $1.28 trillion. That’s 93439232000000 rupees. I don’t even know what term to use for that in rupees. Yahoo could’ve bought it just for 5crs!!!!

Similar thing happened in Lycos. It was very innovative and very early compared to many others but now it’s almost non-existent. I don’t think anyone will recognize Lycos now. Lycos was once valued at $12.5B (maybe 70-80k crores) but later it didn’t innovate like it did in the past and was sold to Daum for just $95M (maybe 500-600crs). Then it was sold to BCG for just $36M.

Some of us want the company to invest heavily in AI and ML and some of us don’t want the company to do that and would want the company to look at fixing the valuation. I seriously don’t know which will be better for the company and the shareholders.

(Sorry for going off topic but I found this very interesting so I wrote a lengthy post about it)

[Diana Horton]

@logan… You state ” Some of us want the company to invest heavily in AI and ML and some of us don’t want the company to do that and would want the company to look at fixing the valuation. I seriously don’t know which will be better for the company and the shareholders.”

The share holders have been deprived of the appropriate Market cap valuations.We all have been sitting with eager expectation that the share Holders will appropriatly rewarded.

If the Market Cap rejuvenation is not respected, then it comes to the Basic question of Why did the company go PUBLIC.Till date the Management of the company has been acting in thier own interest- Own interest of the company and Own interest of the management.

The Interests of the share Holders has never been respected- which unfortunatly has been the blatant truth, which I am sure all the forum members will agree.

The Management has never taken any Step, working towards the benefit of the share holders, to say the least. It has been working One and only towards the betterment of the self and tried to do some betterment for the company.

The issue with the management is- Its a One man army.And the One man army,appears to have a Tunnel vision.The Board of Directors are playing dummy role and appear to be the puppet of the management.

In Nutshell, to answer your question Logan, As a pathway was chosen to go Public by the management in the year 2010 then, ofcourse, Market Cap is a priority. Expansion and getting into AI and ML are ofcourse good thoughts, but once again not at the cost of letting down the share holders again and again.

So, My suggestion to the management is to Take a Note of the Vital fact which is- The company is Public and not a Pvt Ltd company and reward the share holders of appropriate valuations what the company deserves and work towards that.

Letting out warrants at Peanut price of 7.7 and voluntarily keeping the share price controlled at these price not letting or aiding the real growth of the true valuations of the company is unfortunatly criminal.

[Diana Horton]

Further to this Logan, I Honestly cannot see any kind of a True answer from any possible angle for this MASSIVE dilution OF PW- that too at the peanuts price of 7.7, except for One angle- the angle of the management for its self interest and betterment.

I read all your articles about the postulates and possibilities that you think can be attributed for such massive dilution.

Unfortunatly, I hardly can validate any of those postulates, but for one- Greed and SElf Interest of the Management, unfortunatly.Thats a Mammoth dilution of unagreeable degree by any comparable parameter, which I think all the forum members will agree.

[nitin_asce]

@diana can you elaborate how promoters would get benefitted from this transaction.

The other thing is we could not do anything for warrants issue and nor we could have done if promoters had allocated warrants to themselves. Price discovery of warrants is also per sebi norms.

So couldn’t understand what promoters gain by allocating such huge number of warrants to other parties.

[Diana Horton]

Hey Nitin. My First question in response to your question is…

Where did all the so called alleged investors for whom the PW allotted has sprung out?. When there was loads of shares available at Rs 4 and Rs 5( even at the time of allotment) why didnt these so called Allotees buy it in the market?

Can the management show any kind of evidence as to show, a. Why these parties were interested to get warrants b.and How did these parties approach the management c. What made these parties wanted to go for PW that too to a massive overdose of 34 Cr, especially when they knew, It will cause such equity dilution in already compromised and beaten down stock d. Whether these parties were fed any Insider information that they suddenly got interested. The stock has been languishing at such faltry levels for yonder years and all these LLPs suddenly spring up one night and showed interest to the management??!!

Not One soul of the PW allottes has asked any question in the conference call except for the regular names (Established Long trem retailers) who ask the question in frustration

When all the long statnding issues were still pending – like the Axis, Daum, LOC etc etc were pending- what made these so called alleged investors go for PWs.

There is a Open market secret that the management themselves has been stating to various linked parties that the management will take control of these various LLPs over a period of time.

Regarding your statement of price discovery of warrants were as per SEBI norms….Nitin.. You are looking this in a very close Zoomed vision.. Come out a little bit and see with less magnification. The answer you might get is , the price of the stock might have been kept in such a way for x period of time to accomodate the discovery price. Hoorah.. there goes the answer.

Every investor who has been long term here knows that BCG is under the firm grip of operators.This also appears to be a open secret. So, with the firm grip, anything might be possible.

I am not stating that this is the truth. But surely a viable, but most fitting postulate.

[nitin_asce]

@diana I do understand the frustration all of us are having.
I have not seen SEBI taking action on all such promoters.

I think I would have been much happier if promoters had themselves subscribed to these 34 cr warrants. It would have pained much lesser than it is paining now.

[Logan]

@Diana Horton, I agree with you and we all know that (valuation) is the main thing to look after now with all the issues almost sorted out. See whatever I’ve written, I have taken a balanced view. I have always opposed the issuance of warrants and I am angry at them for not disclosing for what purpose these warrants are allotted. I don’t like the allottees too as I don’t see them as stable investors. I have always asked why warrants at a time when they are certain that they’ll get the LOC.

What can we as retail investors do to stop the issuance of warrants? We can vote No to that and we can complain to SEBI but what more can we do when most of the shareholders (even the retail investors) have voted Yes? Many won’t consider the dilution and all they care about is whether the company is taking any action or not. Some see this issuance of warrants as a positive but I don’t agree with them.

That amount he’s raising, it is more than the market cap of the company when it was announced (share was trading at 5). So just like everyone I’m curious on what he’ll do with that money. I thought of discussing with others as to where it will be used. In September call he said he has big plans for the company and in the AGM he hinted he may go for acquisitions like he did in the past so I assumed he may acquire a company using that PW money. I wanted to know everyone’s opinions on this.

All the time when we send questions to the company to be answered in the conference calls, I will always ask the most important critical questions (you can check those). I don’t think I can do more than that to bring changes in the company. I have invested in other companies too but I haven’t seen this much drama in any of those companies.

[Diana Horton]

Dear Logan… In my experience, Its a waste of time to against the management. One will never achieve anything. Because , by crook or shook, the management will implement what they want, eventually

In this particular case, The Management has caused massive Dilution. So long as it is going to the appropriate good hands( Not the ones who it has been allotted now) and gets cemented(EVENTUALLY) and works for the goodness of the company, I wouldnt have much issues around it. I am not here to stop issuance of warrants.

Regarding the approvals, all it needed was 50% of vote. Clearly the management and allies have more than 50% vote and hence, it was bound to happen. So, There is no question about it.I very much doubt that the majority of the retail investors would have voted yes, as it is against thier best interest.

[Diana Horton]

Dear Logan… coming to your statement : “In September call he said he has big plans for the company and in the AGM he hinted he may go for acquisitions like he did in the past so I assumed he may acquire a company using that PW mone”

Its an Oxymoron.

If the management wants to go for acquisitions, its a welcome move- ALWAYS

But, If the management would have done the Warrants at Book value price or high price , imagine the amount of money they would have got and they could have purchased 10 such companies. The Mgmt is not an idiot.They know this.

As it was done at lower price, IT WAS NOT for acquisition, rather for OWN INTEREST. This is a Plain and simple truth

[JRS]

@nitin

Will you feel safe boarding a Volvo bus (BCG with strong fundamentals)which is fully loaded and in very good condition, where in you are blind folded(no transparency)and the captain(SKR) is driving you at 1st gear(no much movement in stock price) to unknown place(without sharing vision of company and giving proper answer) and allowing some strangers (so called stable investors) without any authentication (manipulators or not) to board the vehicle (by issuing warrant).

[Author]

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