[conservative_indian]

Chris, There were many moving parts in today’s reversal. We were anticipating this since last few days. I said early in morning when stock opened in LC… that all is not over until it is over.

Now next battle ground is at 62 and then around 80 and then ATH. I think, FA should be a cakewalk. The disclosures were made after Q2 results in 2020 by SKR about Asset Impairment and those impairments are in all third world states where accounting standards are always a question. We are getting enough clues from ConCall as well as global trends in CTV, OTT and Digital Audio space that we are just scratching the surface in AdTech business.

As we know, manufacturing industry spends almost 8% of their sales on advertising. And that comes to 1.2% of GDP in developed countries like the US. The US has been spending $240 billion on Adtech spending over GDP of $22 trillion. Adtech growth trajectory is the multiplier of the consumption demand. And GDP is the mathematical summation of economic activity. This makes Adtech spend directly proportional to GDP size. Having said this, India at $5 trillion (both shades of money included), we have potential to spend no less than 50 billion USD. We are still making baby steps and this can turn into strides in max 2 years as the growth is exponential.

I am not surprised to see BCG get re-rated and trade at PE over 35-50. EPS is around 5 and likely to grow at 35-40% for next 3 years in line with topline. That opens the new possibilities… 10x from this level can not be ruled out.

Stay PUT.. and ride out the volatile patch.. and disclosures would come in due course but then this price would be the HISTORY.. !!!

[nitin_asce]

I think for the guidance figures, most important question is does it include mediamint numbers or not.
Definitely audio company numbers are not included.

[hw_tw]

My views on the recent Investor’s presentation

– The guidance numbers will dispel the fears spread across that these were kept on hold because of FA

– The guidance figures are largely inline with the numbers SKR has indicated in previous two calls … also indicates that FA / SHP change is not at all linked to this

Coming on to the actual numbers 7100+ topline, 1300+ crores bottomline … At the midpoint a Topline of around 42.5% growth and the bottom line of around 44% growth is a superb growth … especially considering that these numbers are coming on back of a strong 70+% previous year growth rate … also given the tough headwinds across the world in the form of war, Inflation, recession etc;

We are a tad below the billion dollar sales mark … And I feel this number will be revised up and come close to the landmark figure when we add MediaMint numbers midway and Audio AdTech numbers probably in Q4

We didn’t get Quarter wise breakup this time and this would keep some punters busy with their guess work as we approach results 😃

The other good point is the entry of known large Institutions like Goldman Sachs and Morgan Stanley

In terms of the valuations, in normal conditions market would have given a 30 to 40 PE range for this kind of growth rate or even above basis overall market sentiment

Right now this PE figure seems to be discounted largely for FA, SHP and other HR reasons … This would definetly improve but I guess slowy till the time we get some positive updates on FA and SHP and would reach to its fair value once everything gets cleared

Having said that, listing some clues which the market is either ignoring or not so confident about at this stage

FA
– Mr. SS’s positive statement which market reacted positively but right now is clouded by SHP

– The latest results and guidance numbers both inline and has no impact on the ongoing FA observations if any

Promoter’s SHP
– SKR’s statement that both he and VK has not sold any shares … As speculated by many this Indicates that this is a temporary phase and these shares would come back eventually under Promoter group either directly or indirectly (Hope I am not wrong in this interpretation)

– SKR and Co acquiring stakes in LLPs and making them part of Promoter group … Indicating that, at some point of time the same process would happen with other LLPs and Individuals PW holders associated closely with SKR like Subrato Saha

[whyShares]

MFs investing in BCG

So far located these 4 MFs with BCG included in their portfolios. Links to Portfolio holdings included:

***Kotak Nifty Alpha 50 ETF
https://www.moneycontrol.com/mutual-funds/nav/kotak-nifty-alpha-50-etf-regular-plan/MKM1409

***Motilal Oswal Nifty SMCP 250 index
https://www.moneycontrol.com/mutual-funds/motilal-oswal-nifty-smallcap-250-index-fund-regular-plan/portfolio-holdings/MMO064

***ICICI Pru Smallcap Index
https://www.moneycontrol.com/mutual-funds/icici-prudential-smallcap-index-fund-direct-plan/portfolio-holdings/MPI4527

***Nippon India Nifty Smallcap 250
https://www.moneycontrol.com/mutual-funds/nippon-india-nifty-smallcap-250-index-fund-direct-plan/portfolio-holdings/MRC2858

[hw_tw]

I was just thinking how the recent SHP issue has hogged all the limelight over shadowing even the FA issue …

Recalling some of the concerns / allegations which were addressed in the recent past … Note, at some point of time all these were highlighted as the main concern and everything would be fine if this particular item is addressed … and finally when they were addressed Investors sentiment changed only temporarily and most of the investors completely forgot about them shifting focus to some new ones 😃

Addressed
– Numbers are almost stagnant YoY, there is a very little growth

– Growth is due to Covid and it will not be there in coming years

– No real profit generated, burning cash

– Can’t expand both organically as well as inorganically for the above reasons

– No cash to pay back loans

– Company is going to delist

– BCG doesn’t pay dividend

– BCG pays very less dividend and doesn’t have cash to pay dividend

– Brightcom Israeli division is not owned by BCG (hint : Jacob Nirzi is shown as President in recent presentation)

– BCG Indian division revenue is pretty small (hint: MediaMint acquisition)

– BCG has very less number of employees

– BCG’s clients are unknown

– BCG has no FIIs / Mutual funds invested in it

Note, some of these still keep popping up and you know why 🤔 😉

Having looked at these, let’s also look at some items which are either partially addressed

Partially Addressed
– Trade Receivables are high
– Trade Receivables period is high
– Sales has come down on QoQ basis

Most of the long term investors are aware of these and doesn’t bother about them … But to address these, my request to the management is to please include these items in all Quarterly Investor Presentations … the idea is to make the investors aware of the nature of the business so that all the existing as well as new investors doesn’t complain about it

Needless to say the content and charts has to be clear in conveying the message across

For example you can show a chart of Trade Receivables to Sales percentage ratio on a YoY basis …
Similarly show a chart of YoY sales instead of a flat table or add a footnote explicitly mentioning the Seasonality aspect

Finally let’s also look at the burning concerns list 🔥

To be Addressed
– No Analyst attends BCG’s concall … Possibly setup Investor meets as done before

– No response to Investor’s emails … Can tie-up with Investor’s relationship services company

– Foreign subsidiaries aren’t Audited and so aren’t published (sorry, EY audit of Israel division statement hasn’t had any impact)

– CS, CFO are not appointed to delay FA

– Management cashed out huge amounts by selling 19 Cr shares (no impact seen from concall statement)

Hoping company takes some quick actions on all these pending and to-do items asap and clear the clouds for everyone

[Logan]

It’s common that people (including me) hate/don’t like what they don’t understand and since BCG’s business is different and it listed/traded in our markets way before other similar companies did, it’s easy to understand that some people hate it just because they don’t understand it better. Affle though is an ad-tech company, it’s business model is way different than that of BCG’s. Affle is a very good company and it focuses more on ads on mobile devices because of which it doesn’t have huge receivables (there are other factors also).

You have different companies focusing on different things but they all come under the ad-tech bracket. Criteo focuses more on e-commerce whereas others focus more on CTV. So receivables, payables, advances will be different for different companies. Comparing these companies with IT companies doesn’t work and doesn’t make any sense.

If high receivables was the main problem and it meant that the business is fraud then The Trade Desk wouldn’t have become a leader in the ad-tech industry as it has receivables double it’s revenue. The cash on hand that TTD has is also part of the huge payables that are also more than it’s revenues.

Forget everything else and just focus on this, TTD has to pay clients more than the revenue it makes. TTD has managed all these because of the nature of the industry and because it’s clients are also flexible. Big boys of ad-tech industry like Google, Facebook, Amazon don’t have these problems because of their size. If TTD had traded in our markets then some people would’ve called it a fraud because of its huge receivables and payables. They never would’ve believed the profits it makes.

(I think it’s receivable days are more than 500 or 600 days)

So it’s left to investors’ choices and what they want and don’t want in their portfolio. If they worry about receivables then they shouldn’t invest in ad-tech companies. There are many headwinds and tailwinds in the ad-tech industry and investors have to follow many different things before they buy or sell. Metaverse, digital transformation etc are opportunities but inflation, supply chain issues, Ukraine war etc are some of the headwinds. Companies have to manage/balance all these and investors should give importance to these important things.

[sac6310]

Reply to post#14083

@hw_tw please check all promoters holding in that MCA shared website as of 31st march 2021 which is uploaded on mca website on 20th May 2022 and the shareholding provided at bse/nse exchange as on 31st march 20201. You will know what i meant.

@hw_tw you have to check promoter holding in same document which you had mentioned list of 66K shareholdes. please check all promoters holdings in that document and cross check with what is released to exchange.

[Brightspot]

Logon, As per recent disclosure promoter holdings is only 18%, SKR did not sell any share and he acquired shares from LLPs, it should show us increased Promoter holdings correct? What SKR is hiding or why he is hiding? any guesses?

[Brightspot]

@sac6310 what is the promoter holding per MCA website?

[Guru1991]

Dear Brightspot,
Please find enclosed a detailed working of Promoter and PromoterGroup SHP of BCG from Dec2021 to Mar2022. The following are the salient points :-
1. The Promoter (Mr SKR, Vijay Kancharla and their Group companies) have sold shares during the period from 26Jan2022 to 31Mar2022 (Approx 19 Cr shares)
2. However they have brought in four LLPs as Promoter Group Companies to the extent of 18.12 Cr shares approx.
3. There was no new purchase by the Promoter or the four LLPs that were brought in during the above period.
4.The four LLPs were ALLOTTED Shares under the Non_Promoter category on 28July2021 @ Rs 7.70/Share (FV Rs 2 + SP Rs 5.70).
5.These four companies are reflecting the SHP – 30/July/2021 under PUBLIC Category to the extent of 14.50 Cr shares.
6.The First Bonus issue in August 2021 (1:4 Bonus) – Record Date for the Bonus issue was 20/Aug/2021.
7.Consequent to the Bonus issue, the Shareholding of these four companies
increased from 14.50 Cr shares to 18.12 Cr shares in BCG under PUBLIC Category. This is reflected in SHP – 24/Aug/2021.
8. Original cost of Acquisition of 14.50 Cr shares @7.70/Share = Rs 111.65Crores
9. Post Bonus issue in Aug2021, the effective cost of acquisition drops down from Rs 7.70/share to Rs 6.16/share ( Original cost of acquisition of Rs111.65 Crores DIVIDED by 18.125 Crore shares)
10. These 18.125 Crore shares have been transferred from PUBLIC CATEGORY to
PROMOTER CATEGORY IN MARCH 2022 by the PROMOTERS.
INFERENCE
THE PROMOTERS HAVE SOLD APPROX. 19 CRORE SHARES BETWEEN JAN2022 TO MAR2022 WITHOUT DISCLOSING THE INFORMATION TO THE STOCK EXCHANGES.
I FEEL THAT THERE IS LACK OF TRANSPARENCY THOUGH THE BUSINESS MODEL AND THE FINANCIAL METRICS ARE BRIGHT IN BRIGHTCOM.
Request the learned members like Logan, ConservativeIndian to provide their feedback and the way forward for Retail Longterm Investors.I am attaching the workings done by me. ( I am an ardent follower of CI sir in his TG Forum but I do not have rights to post messages there. Hence I am trying to reach him through this. If any of you have posting access in his TG Forum, please forward this message and the enclosed workings)

Attachments:

1. PROMOTERSHP_BCG_DEC21toMAR2022.xlsx

[Guru1991]

Dear Brightspot,
It is relevant to note that the Company Secretary had resigned and relieved on 28 Oct 2021. It is now going to be nearly 8 months and still they have not appointed a successor. This would affect their Corporate Governance. We have already seen how the second bonus issue was messed up by the company. Similarly the CFO had retired from the company on superannuation – they could have atleast requested him to continue till the resolution of FA matter.

[ramganesh1982]

What a strategy in BCG today .. 53.8 rs (nse) bulk sell orders placed while the LC is at 53.75 (nse) . All retail investors are expected to panic considering the bulk sell order at 53.8 levels and desperately place their sell orders at 53.75 .. and that is getting swallowed immediately 🙂

All the best to those who hold long and also to those who sell at 53.75 today 🙂

[vstvm]

Hi friends,
A new presentation on the seasonality of brightcom group’s business has been uploaded in BSE website.
Please check.

[hw_tw]

Thanks to BCG management for sharing Seasonality nature of the business … Request management to please highlight this factor in all Quarterly Presentations too

The key takeaway for the investors is that BCG’s numbers needs to be compared on a YoY basis and not on QoQ basis

The reason being, BCG’s sales is seasonal in nature … It records higher sales during festive times due to high demand arising from advertisers compared to other periods

We see a similar pattern in other industries like AC, Refrigerator business peaking in Diwali and Summer periods, Tractors during Mansoon, Bata during School opening times etc;

Even post this update, I still see messages from some experts comparing QoQ sales … looks like some serious agenda against the company 🔥

In last two weeks we got updates on two pending items, one on Guidance numbers and now on the Seasonality aspect … This is a good sign … Hoping this momentum continues and we get to hear updates on other pending items too 🙏

[Brightspot]

Can anyone confirm if Brightcom excluded from Alpha 50 index, so delay in clarification from management erode market cap day by day

[smitsat]

Niftyindices. Com market data top gainer loser shows BCG right at top in top loser tab. Just checked.

[sac6310]

isn’t strange and fishy that still CS and CFO appointment are pending? CS post is vaccant since last oct and CFO since march even after knowing in advance that fellow will retire in march 22? or none is ready to accept these post in BCG?
any views of members @logan and all

[Brightspot]

And the response given in the conf call by Mr reddy for appointment of CS and CFO is so vague..so i believe there is no appointment of CFO or CS, its like” Daum issue closure within week” since 1 year, LOC and Nasdaq listing lol ..now also investors relation do not pick up call or reply to your email, excuse given few weeks back was high volume of call email due to bonus credit delay

[hw_tw]

@sac6310 – Sorry for the delay… lot of technical issues with the MCA site and I am still not able to access it properly

Coming on to the March 21 SHP file which was uploaded as March 22, I did a comparison of the actual holdings of the promoters in this file with the ones uploaded to exchanges … these are my findings and observations… Please correct me if I am wrong

Looks like Promoters holding was actually low last year March 21 itself … Not sure when they had reduced it and whether it was in 2021 or even before that

When we look at the file, the Promoters actually had only 3.57 Cr shares in total as on March 2021 … note this was pre first bonus

Post bonus this number is 4.47 crores

In percentage terms this is around 7.05% in March 21 and in March 22 this is 3.69% which is near to 3.59% as stated in April 5th SHP post LLPs acquisition

Assuming the above calculations are true and MCA figures are the correct ones these are my observations

Negatives
– Promoters stake was reduced long back
– Exchanges were not informed before

Positives
– Given the fact that BCG share price was below 10 rupees this doesn’t look like the case of Promoters selling stake to make huge 💰 of 1900 odd crores

– Stake was sold long back and not sold now because of ongoing FA

– Promoters are increasing stake now by acquiring LLPs

Overall I see this is positive keeping aside the past

btw, this also confirms the statement made by SKR
– Not sold any shares in last 12 months (MCA file confirms that)

[hw_tw]

Sharing a comparison sheet

– Column D is SHP uploaded to MCA
– Column F has the bonus shares added

Notes
– VK seems to have sold around 22.75 lakhs … this number seems higher than what SKR mentioned
– SKR has not sold any shares
– 7.05% as on March 21
– 3.69% as on March 22 post bonus and PW Shares addition

[Author]

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